Issue 47 May 2001	BYTES IN BRIEF® by Editors: Sharon D. Nelson, Esq. and John W. Simek Associate Editor: Amelia C. Hierholzer Editor Emeritus: G.V. Nelson 9500+ subscribers worldwide © 2001 Sensei Enterprises, Inc./Nelson & Wolfe. All rights reserved. This newsletter may not be reproduced or redistributed in any manner except with consent of the copyright owner. Distributed by Silver Law Inc. under license.

EUROPEAN COMMISSION PROBES INTEL

Last year, the Federal Trade Commission settled antitrust charges against Intel, and now the European Commission has announced that it is investigating "abusive marketing practices" by Intel. On April 6th, the EC confirmed the investigation and said it was pursuing two separate complaints, though the complainants were not named. Unconfirmed reports indicated that the EC is investigating subsidies which Intel gives PC vendors in exchange for using "Intel Inside" logos or tunes in their ads. It has also been reported that the EC is scrutinizing the terms of Intel's licensing of its bus technology. Vendors using processors other than Intel allege that they are denied access to Intel design data. If Intel is found guilty, the EC has the power to levy fines of up to 10% of annual sales. The EC also said that it may expand its antitrust probe of Microsoft. Further information may be found at http://www.newsfactor.com/perl/story/8770.html

U.S./CHINESE HACKERS WAGE NET WAR

Though the recent spy plane rift between the U.S. and China has largely been a diplomatic incident, the recent spate of skirmishes on the Net have drawn attention. Hacking incidents between the two countries occurred once or twice a day prior to the incident, but have now escalated to as many as 40-50 per day. According to a report by Agence France Presse, Chinese hackers are planning a week long attack of U.S. sites during the beginning of May, primarily denial of service attacks. Some anti-USA web sites are now filled with messages pointing to proposed cracking targets such as the United States' Defense Technical Information Center. A heightened vigilance advisory has been issued by the FBI's National Infrastructure Protection Center for May 1-7. The NIPC's web site may be found at http://www.nipc.gov

MICROSOFT AND HP SETTLE WITH FTC ON PDA CLAIMS

The Federal Trade Commission announced on April 3rd that Microsoft and Hewlett-Packard had both agreed to drop assertions that some of their handheld computers come with "built-in" wireless Internet access. A joint advertising campaign for HP's pocket computers, which use a Microsoft operating system, said they came with ''built-in wireless access to the Internet and e-mail at any time and from anywhere.'' The ads carried a fine print disclaimer saying "Modem Required," but the FTC argued that they were inadequate because the disclaimers were hard to read and the ads as a whole were too confusing. The settlement requires both companies to disclose early and conspicuously the need for any additional products or the need to subscribe to an Internet or e-mail access service. Microsoft and Hewlett-Packard did not admit any wrongdoing in the settlement, and both companies said they never received any consumer complaints about the ads. Further information may be found at http://www.ftc.gov/opa/2001/04/hpms4301.htm

FTC SETTLES WITH THREE FIRMS FOR COPPA VIOLATIONS

On April 19th, the Federal Trade Commission announced that it had settled with three web operators who had been charged with violating the Children's Online Privacy Protection Act. The FTC had charged Monarch Services, Inc., Girls Life, Inc. and Looksmart, Ltd. with illegally collecting personally identifying information from children under 13 without parental consent. They also charged the companies with collecting more information than was required for the activities involved, and charged one of the companies with sharing data with third parties without parental consent. The companies have agreed to pay a total of $100,000 to settle the charges and to comply with COPPA in the future. They also agreed to delete all personally identifying information collected from children online at any time since the COPPA Rule became effective, on April 21, 2000. Further information may be found at http://www.ftc.gov/opa/2001/04/girlslife.htm

ECONSUMER.GOV DEBUTS TO COMBAT NET FRAUD

On April 24th, the United States and 12 other countries debuted econsumer.gov, representing an international effort to combat Internet fraud and deception. The multilingual web site, led by the Federal Trade Commission as president of the International Marketing Supervision Network, has both a public section and a private government area. The public area will have general consumer protection information for IMSN counties and contact information for consumer protection authorities in each country, as well as an online complaint form. The site will be in English, Spanish, French and German. Incoming complaints and data will be shared with participating consumer protection entities that have signed a Memorandum of Understanding and Associated Confidentiality Agreement. Participating countries include Australia, Canada, Denmark, Finland, Hungary, Mexico, New Zealand, Norway, South Korea, Switzerland, Sweden and the United Kingdom. The FTC will administer the public web site and all data collected through the site. The site itself may be found at http://www.econsumer.gov

WEB CRAMMERS SETTLE WITH FTC

The Federal Trade Commission announced on April 17th that Voice Media Incorporated and its officers had settled the web cramming charges against them. VMI operates adult entertainment sites and sells memberships, periodically offering free trial memberships for seven days. Consumers were asked for credit card information to verify their age, but assured that they would not be charged fees if they affirmatively canceled their memberships within the trial period. The FTC charged that VMI sometimes charged monthly fees to consumers within the trial period, and that its practices were deceptive and misleading. The settlement prohibits further such practices and requires clear and conspicuous notice of all terms and conditions, as well as a clear opportunity to cancel memberships when terms are changed. Further information may be found at http://www.ftc.gov/opa/2001/04/voicer1.htm

AMERICANS SUPPORT E-MAIL MONITORING

Pew Internet and American Life Project released a survey on April 2nd indicating that 54% of Americans approve of the FBI and other law enforcement agencies intercepting e-mail to and from criminal suspects. 73% of the 2,096 respondents said they were worried about criminals utilizing the Net to plan and execute crimes, and 43% described themselves as very worried. Respondents worried most about child pornography, followed by credit card theft, terrorism, wide-scale fraud, hackers accessing government and business sites, and computer viruses. When asked specifically about Carnivore, the FBI's e-mail surveillance system, those familiar with it were equally divided with 45% in favor of it and 45% opposed because of its potential for abuse. 62% said that the country needs new privacy laws to protect online communications and only 14% thought the current laws covering phone conversations would suffice. The full report may be found at http://www.pewinternet.org/reports/toc.asp?Report=32

CLASS ACTION SUIT AGAINST MICROSOFT MAY PROCEED

Earlier this year, Microsoft persuaded a federal judge to dismiss 38 class action antitrust suits on the grounds that consumers who didn't buy directly from the company had no standing to sue under federal law. However, a Minnesota state judge has allowed consumers alleging overcharges, who bought software through middlemen, to proceed as a class action case. Unlike federal antitrust law, Minnesota's law allows indirect purchasers to sue for damages. The Minnesota class is comprised of people who acquired Microsoft Windows or MS-DOS software since May 1994. Judge Bruce A. Peterson rejected Microsoft's argument that its software pricing and distribution system was too complex to determine damages for a class. California, Wisconsin, New Mexico, Michigan, South Dakota, North Dakota, Maine and the District of Columbia also have passed laws that allow indirect purchasers to recover damages in antitrust suits. Certification has already been granted in similar suits in California and Arizona, with applications for class action status pending in Maine, Wisconsin, South Dakota and Michigan. Information about the various antitrust class action suits against Microsoft, past and present, may be found at http://www.microsoft.com/presspass/legal/ca/

INTERNET BANKING FRAUD SCHEME FOILED BY ICC

The International Chamber of Commerce (ICC) announced on April 12th that it had uncovered an Internet fraud scheme involving phony bank guarantees worth $3.9 billion. Some 29 websites used in the scam were shut down but the criminal masterminds themselves remained at large. Victims had paid tens of thousands of dollars for the issuance of bank guarantees that proved to be fraudulent. They were validated on the web sites, which appeared to be run by an international clearinghouse for financial securities and a financial information agency. The sites used domain names including www.bloomberg.50megs.com and www.euroclear30.50megs.com, thus confusing victims with legitimate entities Bloomberg L.P. and Euroclear Bank, an international clearinghouse for securities and bonds. The scam operated in the U.S. and the Orient, but appeared to rake in victims from other countries as well. Further information may be found at 
http://www.iccwbo.org/ccs/news_archives/2001/fraud.asp

PRIVACY REPORT ASKS FOR FEDERAL LAWS

On April 13th, the Progressive Policy Institute (PPI) asked Congress to enact federal privacy legislation that would preempt state law and permit consumers to opt out of online information sharing. PPI, self-described as an organization run by centrist "new Democrats," made the suggestion in its new policy paper entitled "Online Privacy and a Free Internet: Striking a Balance." The recommendations fell short of what many privacy groups have asked, with the report specifically suggesting that federal laws should not mandate what web sites may do with information that does not identify individuals. The report states that overly restrictive privacy regulations could bury many online companies that are struggling to find a way to replace fading advertising revenues. The PPI said Congress also should not mandate standards for protecting data or making it available to users, the so-called "access" provision which is dear to many privacy groups. The paper calls for a set of reasonable federal guidelines for penalties that can be imposed on violators, as well as a "safe harbor" for Web sites that 
participate in approved "seal programs," in which third parties certify Web sites' compliance with privacy policies. A copy of the report may be found at http://www.ndol.org/documents/E-Privacy2.pdf

COMPAQ BUYS PROXICOM FOR $266 MILLION

On April 26th, Compaq announced that it would purchase the Internet consulting firm Proxicom for $266 million, thereby strengthening its service arm. Compaq is the world's second largest PC manufacturer. Proxicom was founded in 1991, and was an instant success in the consulting industry, with a high share price of more than $57.00. Recently, that price has dropped to the $4 range. Compaq has said it will immediately begin a tender offer for all outstanding Proxicom shares and that any shares not thus acquired will be secured in a second phase merger. Proxicom will trade under its own name but will be a wholly owned subsidiary of Compaq Computer Corporation. Compaq's press release regarding the acquisition may be found at http://www.compaq.com/newsroom/pr/2001/pr2001042601.html

LEGISLATORS ASK COURT TO CLOSE ANTI-ABORTION WEB SITE

More than 40 members of the House and Senate, in a joint brief filed on April 13th, asked the 9th Circuit Court of Appeals to reconsider its ruling allowing a controversial anti-abortion web site to continue operations. The so-called "Nuremberg Files" site includes "wanted" posters of doctors who perform legal abortions. The brief argues that the court's ruling could incite "renewed violence against reproductive health clinics." The lawmakers argue that the site directly incites violence against physicians and is therefore not protected speech under the First Amendment. The site itself may be found at 
http://www.ru486registry.com/atrocity/

OFFICE E-MAIL ONE-THIRD OF SPAM????

According to a survey released on April 19th by Gartner, Inc., 34% of business e-mail within companies might well deserve the label "spam." According to the survey, employees spend an average of 49 minutes per day managing their e-mail. The respondents say that only 27% of the e-mail they receive requires immediate attention. Even though the survey found that most companies had e-mail policies, they also found that few truly help their employees how to deal with e-mail efficiently. Commonly, employees use the "reply all" function too often where they might be better served replying to the necessary person/people and ending e-mail with "No reply necessary." There is also a tendency to forward jokes, chain letters, or other non-business e-mail. Further information may be found at http://www3.gartner.com/Init

GAO CONCERNED ABOUT PRIVACY

In a report released on April 20th, the General Accounting Office expresses its concern that information sharing among federal agencies may be more efficient and lower costs, but it may also threaten the anonymity of sensitive data. In the 172 page report entitled "Record Linkage and Privacy: Issues in Creating New Federal Research and Statistical Information," the GAO says that the increasingly common practice of linking data sets from several different agencies often creates new information about citizens. The new data can sometimes be used to identify people whose identity was previously masked by the separation of data. Federal agencies are permitted to share certain data such as names, birth dates and Social Security numbers, but must provide stronger protections for more sensitive information. Many examples of inter-agency sharing are given, raising concerns about re-identification because modern computer technology may enable 'data snoopers' or 'data detectives' to link de-identified public-use data sets to other information in order to identify specific people. The study recommends a number of solutions, including requiring agencies to obtain signed consent forms from citizens in order to join their public data with more sensitive information. The GAO also recommended that for particularly sensitive information, researchers could obtain information from secure data centers where they could study the data under controlled conditions. The GAO report may be found at http://www.gao.gov/new.items/d01126sp.pdf

ONLINE ANONYMITY PRESERVED BY COURT

On April 19th, a federal court in Seattle, Washington ruled that an Internet Service Provider could not be compelled to reveal the names of individuals who posted anonymous messages on a bulletin board. U.S. District Court Judge Thomas Zilly quashed a subpoena in which 2TheMart.com was seeking to uncover the real identities of 23 anonymous Internet posters who engaged in online discussions critical of the business. The business, already in trouble, filed for bankruptcy. The originating suit was not against the posters, but against the company for failing to disclose negative information in a timely manner. The identity of the posters was sought by the company so that they could give evidence of a possible stock manipulation. The American Civil Liberties Union, which helped defend the posters, has consistently argued that plaintiff should have to prove that they suffered "actual economic harm" from an online attack before limiting the posters' First Amendment Rights. Further information may be found at http://archives.seattletimes.nwsource.com/cgi-bin/texis/web/vortex/display?slug=neted&date=20010423

ATTORNEY GENERAL WILL CREATE PRIVACY POST

The Justice Department announced on April 20th that Attorney General John Ashcroft will appoint a specific individual to deal with privacy issues. In a meeting with privacy advocates, Ashcroft listened to concerns about the FBI's e-mail surveillance system, now renamed, but forever to be known as "Carnivore," its original designation. The privacy advocates urged Ashcroft to allow Internet Service Providers to handle court authorized searches rather than the FBI, lowering the risk of abuse. Ashcroft was reportedly noncommittal in response. Further information may be found at http://news.cnet.com/news/0-1005-200-5678159.html

COURT DENIES REQUEST TO WEBCAST MCVEIGH EXECUTION

On April 18th, a federal judge ruled that a webcast of Timothy McVeigh's execution is not a form of news to which the public is entitled, but sensationalism which could threaten the security and order of the federal prison system. Entertainment Network, Inc. had filed a suit asking permission to webcast the execution of the Oklahoma City bomber, but was denied by District Court Judge John D. Tinder in Indiana. The ruling is expected to be appealed to the U.S. Court of Appeals for the Seventh Circuit or to the U.S. Supreme Court as a matter of constitutional emergency since the date of execution is set for May 16th. Entertainment Network is best known for adult entertainment like VoyeurDorm.com, a popular site that features college women living in a "dorm" with 55 web cams present. The company claims that the federal rule prohibiting a live media broadcast of a federal execution is a "content-based" restriction that violates the First Amendment. The company has said it would charge $1.95 per viewer, but donate the proceeds to the victims of the bombing. Judge Tinder noted that "no court in this nation" has ever ordered that a media organization be allowed to film an execution for broadcast and that, if the public has no right to film a federal execution, neither does the press. He also said that the government had an interest in "not sensationalizing and preserving the solemnity" of the execution, when a webcast could anger prison inmates and cause disorder. The Attorney General's most recent statement about the execution may be found at http://washingtonpost.com/wp-dyn/articles/A12871-2001Apr27.html

SUITS CLAIM CELL PHONES ARE HEALTH RISKS

Two more cell phone law suits were filed on April 19th, alleging health hazards from infections to brain damage. The suits were filed in New York and Baltimore, MD. The suits allege that cell phone service providers and manufacturers know that their phones generate unsafe levels of microwave radiation but have tried to suppress the scientific evidence. Verizon Communications noted that the safety standards for cell phones are set by the U.S. Federal Communications Commission and the Food and Drug Administration which both have reported that there is no clear evidence of adverse health effects. The lawsuits contend that wireless handsets held to the temporal lobe of the brain emit microwave radiation at levels capable of damaging DNA, altering cell function and affecting basic brain activity. Rather than claiming actual injuries, the suits demand money to pay for headsets that could mitigate exposure to allegedly damaging radiation. They also seek unspecified punitive damages. There are an estimated 113 million U.S. cell phone customers and an estimated 625 million cell phone users worldwide. There have been other suits filed thus far, but some have been dismissed and none have gone to trial. One perspective on these suits may be found at http://www.iht.com/articles/17704.html

GUILTY PLEA IN EBAY ART SCAM

Two men who defrauded eBay buyers out of $450,000 in an attempt to sell a fake painting purportedly done by artist Richard Diebenkorn have pleaded guilty. Kenneth Walton and Scott Beach pleaded guilty in federal court in Sacramento, California to eleven counts of fraud between them. They reportedly used illegal "shills" (self-bids) to inflate prices in more than half of the 1,100 auctions they hosted on eBay between late 1998 and May 2000. A third man indicted in the scam, Kenneth Fetterman, 33, remains a fugitive. As part of their plea, Walton and Beach agreed to pay back nearly a combined $100,000 and to refrain from engaging in any Internet auctions for a period of up to three years. Walton was also disbarred as an attorney in California. The two men had faced up to five years in prison for each of the criminal counts but authorities agreed under a plea bargain to recommend a lower sentence if the pair cooperated. Further information may be found at http://www.ecommercetimes.com/perl/story/9045.html

NAPSTER: STILL WORKING ON BEING LEGAL

Napster announced on April 20th that it has licensed Relatable's acoustic fingerprinting technology to help filter songs in compliance with a federal injunction. An Alexandria, Virginia company, Relatable's technology identifies music based on the recordings themselves and analyzes the acoustical properties of a recording's waveform to identify it precisely, regardless of its audio format, bit rate, or minor signal distortion. On April 27th, Napster sent its supply of songs available for song-swapping plummeting, telling users that it was trying to comply with the federal court order. U.S. District Judge Marilyn Hall Patel, clearly unhappy with steps taken by Napster to date and categorizing them as "disgraceful," nonetheless said she wanted to hear the report of a technical expert assigned to the case before taking further measures. http://www.pcworld.com/news/article/0,aid,46904,00.asp

ALEXA SETTLES PRIVACY LAWSUIT

Amazon.com's subsidiary Alexa Internet has settled a suit requiring it to pay up to $1.9 million to users whose personally identifiable information can be located in its database. Alexa rates Net content for users and provides information about related links and contact information for visited sites. It does so by a browser plug-in which retrieves information, including the URLS of the pages its users visit. In a series of class action lawsuits, plaintiffs alleged that Alexa collected and stored their personal information in violation of privacy laws. The settlement mandates that Alexa will pay up to $40 to each user whose personal information is found in its database. It will also donate $100,000 to Internet public policy programs and consumer groups, and delete data which might be tied to individual users. Amazon.com has declined to comment on the situation. Further information may be found at http://www.infoworld.com/articles/hn/xml/01/04/27/010427hnalexa.xml?todayiniw=3