Reference no: EM133812607

Unfair or Deceptive

For an action or practice to be "unfair," it must be one that (a) causes or is likely to cause substantial injury to consumers, (b) which is not reasonably avoidable by consumers themselves, and (c) not outweighed by countervailing benefits to consumers or to competition. As the Tenth Circuit Court of Appeals concluded, whether the defendant violated some other law, rule, or regulation is relevant, but not dispositive, in determining whether the defendant's acts or practices are unfair under § 5 of the FTC Act.

To prove a deceptive act or practice under § 5(a)(1), the FTC must show three elements: (1) a representation, omission, or practice that (2) is likely to mislead consumers acting reasonably under the circumstances, and (3) the representation, omission, or practice is material. The deception need not be made with an intent to deceive; it is enough that the representations or practices were likely to mislead consumers acting reasonably. Further, the deceptive acts or practices must be "likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition." A defendant may be held liable for deceptive practices that cause consumer harm if, with knowledge of the deceptive nature of the scheme, he either "participate[s] directly in the practices or acts or ha[s] authority to control them."

At issue in LeadClick, specifically, is not the privacy or security of personal information. Rather, at issue in that case are LeadClick's fundamental business practices, including its monetization model.

Considering the elements of an unfair or deceptive act or practice claim, what acts or practices could be "unfair" or "deceptive" within the scope of § 5 of the FTC Act with respect to data privacy and security?