FTC decision puts spy software manufacturers on notice

The Federal Trade Commission recently settled with several companies regarding software that allowed the companies to spy on the computer's users by capturing screenshots, logging keystrokes, and taking pictures through the computer's webcam. The software was used by rent-to-own companies to track buyers when they became delinquent on payments. In addition to the rent-to-own companies, the FTC complaint also included the software manufacturer, Designware.

The software, PC Rental Agent, was installed on an estimated 420,000 computers in the United States, Canada, and Australia and marketed exclusively to businesses who rent computer equipment. The manufacturer recommended that companies notify customers of the software, but it was not required, and users could not detect the software's presence on their own.

In their complaint, the FTC argued that the software's "collection and disclosure to third parties of private and confidential information about consumers, including both those who rented the computer and
those who are merely using it, causes or is likely to cause substantial harm to consumers." As the manufacturer provided the means for the rental companies to engage in "unfair acts or practices," they had violated the FTC Act. It is the mission of the FTC "[t]o prevent business practices that are anticompetitive, deceptive, or unfair to consumers."

The settlement between Designware and the FTC prohibits the company from continuing to license or sell the software. This order is what one of this blog's readers calls the "biggest unfairness decision in the history of the FTC" because it extends beyond a direct business practice but also to the licensing of software the FTC deems "unfair."

Software manufacturers have been creating similar spying software for a long time, and this decision is likely to have put them on notice that the FTC's tolerance for the genre is soon to end. Of course, the FTC's authority would only extend to a business that is using the software to track consumers; thus, consumer or business-to-employee use would not be under their authority. However, the creation of software that is sold to a business in order to track a consumer could bring the creator under the wrath of the FTC.

Designware, which did not admit fault in the settlement, has filed for bankruptcy. The filing lists the Florida and California AG's offices as creditors, suggesting those offices may be considering further legal action.

Related Links:
Agreement
Complaint
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