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Aug
06
2008

Competitive Litigation on Privacy Policy Violations

Everybody knows about how the pesky little privacy policy on your website can land you in hot water with the FTC. Under the FTC Act, deceptive and unfair practices against consumers can get you a 20 year relationship with the FTC and a hefty fine. For the most part though, the resources of the FTC are such that they can’t go after every company that violates its privacy policy. Also, its really for individuals to pursue cases as most of us don’t have big litigation war chests to sue companies that violate our privacy.

All that has now changed. The bright folks over at Perkins Coie have figured out that deception isn’t bad for just consumers. The Lanham Act (usually associated with anti-trust actions) also allows for competing companies to sue their competitors for unfair and deceptive trade practices. In the case CollegeNET, Inc. v. XAP Corporation, Perkins Coie obtained a $4.5 Million judgment for CollegeNET because XAP’s practices violated its privacy policy. The reasoning is that if deceiving consumers to use your service harms the consumer, it also harms competitors.

Now, those with the money have the incentive to go after companies that don’t follow their privacy policies. One more reason to have monitoring and compliance services to make sure you are following your privacy policy.

- Posted by John Tomaszewski, VP Legal, Policy and Compliance

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