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Home > Privacy and Business > Privacy Law Governing the Private Sector > Contracts > Unfair Competition Law

Unfair Competition Law

The federal government and most states have unfair competition laws that prevent various deceptive practices by business. In the case of privacy, these laws protect consumers against companies that misrepresent what they do with personal information. Unfair competition laws provide an extra check against companies that do not follow their privacy promises to consumers.

Often, unfair competition laws give both consumers and government regulators an opportunity to sue for violations. They have been used by both in the privacy area.

Unfortunately, regulators sometimes make too large a meal of their authority to prevent misrepresentation. An example in the privacy area is the GeoCities case. In 1998, the Federal Trade Commission (FTC) initiated an action against GeoCities for misrepresenting the purposes for which it collected information from visitors to its Web sites. In the settlement negotiated by the FTC, GeoCities was forced to agree to several things that the FTC can not require by direct regulation.

GeoCities was required to post a privacy policy (though, even today, no law requires it), get parental consent before collecting information from children (several years before the Children's Online Privacy Protection Act took effect), and provide a link on its pages to the FTC's Web site. This settlement did far more than prevent misrepresentation or punish GeoCities for past misdeeds. They were part of a fairly obvious and ham-handed FTC effort to regulate the Internet, an effort that continues today.

The practice of requiring businesses to accept broad regulation as part of a settlement has been identified in legal scholarship as "administrative arm-twisting," and it is engaged by many regulatory agencies.


Complaint in Judnick v. DoubleClick (sounding in California unfair competition law) (January 26, 2000)

Hearings Regarding the FCC's Review of the SBC/Ameritech Merger, Testimony of Professor Lars Noah to the U.S. House Committee on the Judiciary's Subcommittee on Commercial and Administrative Law (discussing administrative arm-twisting by FCC) (May 25, 1999)

Internet Site Agrees to Settle FTC Charges of Deceptively Collecting Personal Information in Agency's First Internet Privacy Case, Federal Trade Commission press release (August 13, 1998)

Comments? (Subject: UnfairCompetition)

[updated 10/27/00]

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