Few Internet users give a second thought to posting information about their families, careers, education and hobbies on social-networking sites. Despite users' increased willingness to share personal information, alumni networking Web site Classmates.com recently learned the hard way that consumers still draw a line between acceptable and unacceptable uses of their information.
In March 2010, Classmates.com paid almost $11 million to settle charges related to fraudulent marketing and data mining. Plaintiffs alleged the site used a computer program to process biographical data (such as high school name and graduation year) provided by registered unpaid members to generate E-mails suggesting to members that persons of interest were trying to contact them. Unpaid members were told to purchase upgraded memberships to learn who was trying to reach them. Upon paying the fee, members learned that nobody was trying to reach them.
The case highlights several common practices that could cause trouble for any marketer. Anyone with an E-mail account has received marketing messages with leading subject lines; the Classmates.com case shows that these tactics, when based on false promises, are ripe for litigation.
Compounding Classmates.com's problems, deceptive E-mail subject lines and deceptive E-mail content in general can invoke state anti-spam statutes and provide a separate basis for private litigants to bring a lawsuit.
Perhaps most important to all online marketers are the disclosure-related lessons from the case. The E-mails generated by Classmates.com contained coding to check for cookies that, if detected, allowed the member to automatically log into the site without providing a password. If no cookie was detected, the E-mail would set a cookie.
To add to the list of Classmates.com's woes, another class action lawsuit was filed in U.S. District Court in Seattle alleging the company violated members' privacy by making personal information available to users of other social-networking sites and mobile devices, and required members to opt-out if they did not consent to such openness. The suit alleges that E-mails to members about the new policy deceived members into waiving important privacy protections.
As the FTC re-examines whether traditional privacy policies are still effective and explores new paradigms for online privacy, the problems encountered by Classmates.com can be instructive to other marketers.
The likely outcome of the FTC's deliberations is that more wide-ranging disclosures will be required across the board. New regulations may compel marketers to provide more detailed explanations of online technologies, their ability to collect and analyze data from various sources, and how users may manage privacy preferences.
Marketers should proactively examine their E-mail practices to identify potential problems. They should keep an eye on policymakers in Washington and state attorneys general to anticipate business practices targeted for future regulation and ensure the voice of the DR industry is heard during any hearings.
Jeffrey D. Knowles and Ellen T. Berge are attorneys at Washington, D.C.-based Venable. They practice advertising and marketing law and can be reached at (202) 344-4000.