Out-Law / Your Daily Need-To-Know

Website operator charged with privacy breach

Out-Law News | 24 Mar 2006 | 1:55 pm | 1 min. read

Marketing firm Gratis Internet is facing legal action for selling personal data obtained from millions of consumers under a promise of confidentiality. New York Attorney General Eliot Spitzer has filed suit, calling it the biggest deliberate breach of privacy in internet history.

Advert: Free OUT-LAW breakfast seminars, UK-wide: open source software; and data retention"Unless checked now, companies that collect and sell information on consumers will continue to find ways to erode the basic standards that protect privacy in the internet age," Spitzer explained.

Spitzer’s office began an investigation of companies involved in "data mining" or the compilation and sale of marketing lists early last year. It says that the focus of the investigation quickly turned to Gratis, a Washington, DC-based company that owns and operates several websites providing consumers with ways to receive free products, generally through free trials of yet other products.

These sites include or have included: FreeiPods.com; FreeCDs.com; FreeDVDs.com and FreeVideoGames.com.

According to Spitzer, between February 2000 and June 2004 Gratis assured the users of its websites that it would protect their personal information, promising "we will never give out, sell or lend your name or information to anyone.”

However, the Attorney General’s investigation confirmed that Gratis’s owners, Peter Martin and Robert Jewell, repeatedly violated these promises during 2004 and 2005 by selling access to lists of millions of Gratis’s customers to three independent email marketers.

The marketers then sent hundreds of millions of email solicitations to those users, on behalf of their own customers. The suit alleges that in each of these deals, Gratis wrongfully shared between one and seven million confidential user records.

The suit also alleges that, during the course of its investigation, Gratis repeatedly, but falsely, denied that such data sharing had even occurred. It cites specific data sharing contracts, as well as testimony and other evidence provided by internet marketers that did business with Gratis.

The suit, filed yesterday in New York State Supreme Court, seeks penalties and injunctive relief against Gratis and its principals, under New York’s consumer fraud statutes.

The suit follows the Attorney General’s settlement, earlier this month, with email marketer Datran Media, to whom Gratis had sold its user records. Datran Media agreed to pay $1.1 million to settle that investigation.

Gratis has made no comment on the suit as yet.