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H.R. ————, A BILL TO RENEW THE FEDERAL 

TRADE COMMISSION’S AUTHORITY TO COMBAT 

CROSS–BORDER SPAM, SPYWARE, AND FRAUD 

THROUGH REAUTHORIZATION OF THE U.S. 

SAFE WEB ACT OF 2006 

HEARING 

BEFORE THE

SUBCOMMITTEE ON COMMERCE, MANUFACTURING, 

AND TRADE 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

JULY 12, 2012 

Serial No. 112–164 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

JOE BARTON, Texas 

Chairman Emeritus 

CLIFF STEARNS, Florida 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO MACK, California 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

SUE WILKINS MYRICK, North Carolina 

Vice Chairman 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

BRIAN P. BILBRAY, California 

CHARLES F. BASS, New Hampshire 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

CORY GARDNER, Colorado 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

HENRY A. WAXMAN, California 

Ranking Member 

JOHN D. DINGELL, Michigan 

Chairman Emeritus 

EDWARD J. MARKEY, Massachusetts 

EDOLPHUS TOWNS, New York 

FRANK PALLONE, JR., New Jersey 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

CHARLES A. GONZALEZ, Texas 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

SUBCOMMITTEE ON COMMERCE, MANUFACTURING, AND TRADE

MARY BONO MACK, California 

Chairman 

MARSHA BLACKBURN, Tennessee 

Vice Chairman 

CLIFF STEARNS, Florida 

CHARLES F. BASS, New Hampshire 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

G.K. BUTTERFIELD, North Carolina 

Ranking Member 

CHARLES A. GONZALEZ, Texas 

JIM MATHESON, Utah 

JOHN D. DINGELL, Michigan 

EDOLPHUS TOWNS, New York 

BOBBY L. RUSH, Illinois 

JANICE D. SCHAKOWSKY, Illinois 

JOHN P. SARBANES, Maryland 

HENRY A. WAXMAN, California (ex officio) 

(II) 

(III) 

C O N T E N T S 

Page 

Hon. Mary Bono Mack, a Representative in Congress from the State of 

California, opening statement ............................................................................. 1 

Prepared statement .......................................................................................... 4 

Hon. G.K. Butterfield, a Representative in Congress from the State of North 

Carolina, opening statement ............................................................................... 8 

Hon. Henry A. Waxman, a Representative in Congress from the State of 

California, prepared statement ........................................................................... 41 

Hon. Edolphus Towns, a Representative in Congress from the State of New 

York, prepared statement .................................................................................... 43 

WITNESSES

Hugh G. Stevenson, Deputy Director for International Consumer Protection, 

Federal Trade Commission .................................................................................. 9 

Prepared statement .......................................................................................... 11 

SUBMITTED MATERIAL

Discussion Draft of H.R. ————, A Bill To extend the Undertaking Spam, 

Spyware, And Fraud Enforcement With Enforcers beyond Borders Act of 

2006, and for other purposes, dated July 3, 2012, submitted by Mrs. Bono 

Mack ...................................................................................................................... 6 

(1) 

H.R. ————, A BILL TO RENEW THE FEDERAL 

TRADE COMMISSION’S AUTHORITY TO COMBAT CROSS–BORDER SPAM, SPYWARE, AND 

FRAUD THROUGH REAUTHORIZATION OF 

THE U.S. SAFE WEB ACT OF 2006 

THURSDAY, JULY 12, 2012 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON COMMERCE, MANUFACTURING, AND

TRADE, COMMITTEE ON ENERGY AND COMMERCE, Washington, DC. 

The subcommittee met, pursuant to call, at 10:00 a.m., in room 

2322 of the Rayburn House Office Building, Hon. Mary Bono Mack 

(chairman of the subcommittee) presiding. 

Members present: Representatives Bono Mack, Harper, Lance, 

Cassidy, Guthrie, Butterfield, and Gonzalez. 

Staff present: Paige Anderson, Commerce, Manufacturing, and 

Trade Coordinator; Kirby Howard, Legislative Clerk; Brian 

McCullough, Senior Professional Staff Member, Commerce, Manufacturing, and Trade; Gib Mullan, Chief Counsel, Commerce, Manufacturing, and Trade; Andrew Powaleny, Deputy Press Secretary; 

Shannon Weinberg Taylor, Counsel, Commerce, Manufacturing, 

and Trade; Michelle Ash, Democratic Chief Counsel, Commerce, 

Manufacturing, and Trade; Felipe Mendoza, Democratic Senior 

Counsel; and Will Wallace, Democratic Policy Analyst. 

OPENING STATEMENT OF HON. MARY BONO MACK, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mrs. BONO MACK. We will now come to order. 

Good morning, everybody. The purpose of today’s hearing is to 

provide subcommittee members with an opportunity to review and 

discuss the U.S. SAFE WEB Act of 2006. And the chair now recognizes herself for an opening statement. 

When it comes to the future of electronic commerce, consumer 

trust and online privacy are certainly ‘‘trending topics.’’ Even 

though it serves billions of users worldwide—with e-commerce in 

the United States topping $200 billion last year for the first time 

and up 15 percent so far this year—the Internet very much remains a work in progress. Still, in just over 25 years, the Internet 

already has spurred transformative innovations. It has incalculable 

value. It has become part of our daily lives. And it has unlimited 

potential to affect positive social and political change. But do AmerVerDate Aug 31 2005 09:29 Aug 20, 2013 Jkt 037690 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 F:\11E533~1\112-16~1 WAYNE
2 

icans really believe enough is being done today to protect them 

from online fraud? 

Frankly, I am concerned that e-commerce will cease to grow and 

flourish if consumers lose faith in their ability to be protected from 

online predators, jeopardizing future innovation as well as our Nation’s fragile economic recovery. 

One important tool in combating cross-border fraud, spam, and 

spyware is the U.S. SAFE WEB Act of 2006, which is set to expire 

next year. Today we will be considering legislation which I plan to 

introduce this week to reauthorize this important crime-fighting 

and consumer protection law for another 7 years. 

Clearly, there is a lot at stake. About a decade ago, the FTC 

began to highlight the growing problems it encountered in effectively combating Internet scams and fraud directed at American 

citizens by foreign operators, oftentimes involving organized crime 

rings. By 2005, an estimated 20 percent of consumer complaints 

the FTC received involved fraud originating outside of the U.S. According to an analysis of those complaints from the Consumer Sentinel Network, Americans suffered annual losses to foreign operators totaling nearly $220 million. 

The FTC subsequently identified severe limitations in its authority to combat cross-border fraud, spam, and spyware relative to 

that of other U.S. regulators. The biggest roadblock to protecting 

consumers was the Commission’s lack of authority to share information with foreign law enforcement agencies. 

In order to expand its ability to effectively fight online fraud, the 

FTC sent Congress legislative recommendations in 2005 seeking 

additional authorities. Without objection, Congress passed the U.S. 

SAFE WEB Act on December 6 of 2006, and it was then signed into 

law by President Bush on December 22 of 2006. Pursuant to the 

Act, the FTC issued a report in 2009, ‘‘The U.S. SAFE WEB Act: 

The First Three Years,’’ detailing its use and day-to-day experience 

with the authority granted by the law. 

Over a 3-year period, covering 2006 through 2008, the FTC received more than a quarter of a million cross-border complaints by 

American consumers. The FTC also reported that it shared confidential information in response to 38 requests from 14 foreign 

agencies in six countries, resulting in numerous enforcement proceedings. 

By any measure, the U.S. SAFE WEB Act has been a clear success to date and should be reauthorized before its expiration next 

year. Let me emphasize a very important point: Our goal is to pass 

a clean reauthorization of the law, and my draft legislation does exactly that. 

The U.S. SAFE WEB Act amends the FTC Act, authorizing the 

Commission to share information involving cross-border fraud with 

foreign consumer protection agencies, subject to important safeguards; protect from public disclosure confidential information received from foreign consumer protection agencies that otherwise 

would not be shared; pursue a broader class of frauds, involving 

international activity that harms U.S. consumers; seek redress on 

behalf of foreign as well as U.S. consumers victimized by U.S.- 

based wrongdoers; and finally, make criminal referrals for crossborder criminal activity when violations of FTC law also violate 

3 

U.S. criminal law. This is necessary because some foreign agencies 

address consumer fraud as a criminal—rather than civil—law enforcement issue. 

Today, with nearly 1.5 billion credit cards now in use in the 

United States, nearly everyone in America has a stake in making 

certain that the FTC has the powers it needs to combat cross-border fraud, spam, and spyware. 

In closing, let me emphasize, this is a very important bill, and 

I am asking for your favorable consideration as we begin the process of reauthorizing the U.S. SAFE WEB Act. It is good for American consumers, it is good for the future of e-commerce, and it is 

the right thing to do. 

And with that, I would like to now recognize the ranking member of our subcommittee and my friend, Mr. Butterfield of North 

Carolina, for his opening statement. 

[The prepared statement of Mrs. Bono Mack and the proposed 

legislation follow:] 

4 


82427.001

Opening Statement of the Honorable Mary Bono Mack 

Subcommittee on Commerce, Manufacturing, and Trade 

Legislative Hearing on "H.R. --' a bill to renew the Federal Trade Commission's authority 

to combat cross-border spam, spyware and fraud through reauthorization ofthe U.S. 

SAFE WEB Act of 2006" 

July 12,2012 

(As Prepared/or Delivery) 

When it comes to the future of electronic commerce, consumer trust and online privacy are 

certainly "trending topics." 

Even though it serves billions of users worldwide - with e-commerce in the United States 

topping $200 billion last year for the first time and up 15 percent so far this year - the Internet 

remains a work in progress. Still, in just over 25 years, the Internet already has spurred 

transformative innovations. It has incalculable value. It has become part of our daily Jives. And 

it has unlimited potential to affect positive social and political changes. 

But do Americans really believe enough is being done today to protect them from online fraud? 

Frankly, I'm concerned that e-commerce will cease to grow and flourish if consumers lose faith 

in their ability to be protected from online predators, jeopardizing future innovation as well as 

our nation's fragile economic recovery. 

One important tool in combating cross-border fraud, spam and spy ware is the U.S. SAFE WEB 

Act of 2006, which is set to expire next year. Today, we will be considering legislation which I 

am introducing this week to reauthorize this important crime-fighting & consumer protection law 

for another seven years. 

Clearly, there's a lot at stake. About a decade ago, the Federal Trade Commission began to 

highlight the growing problems it encountered in effectively combating Internet scams and fraud 

directed at American citizens by foreign operators, often times involving organized crime rings. 

By 2005, an estimated 20 percent of consumer complaints the FTC received involved fraud 

originating outside of the United States. According to an analysis of those complaints from the 

Consumer Sentinel Network, Americans suffered annual losses to foreign operators, totaling 

nearly $220 million. 

The FTC subsequently identified severe limitations in its authority to combat cross-border fraud, 

spam and spyware relative to that of other U.S. regulators. 

The biggest roadblock to protecting consumers was the Commission's lack of authority to share 

information with foreign law enforcement agencies. 

In order to expand its ability to effectively fight online fraud, the FTC sent Congress legislative 

recommendations in 2005 seeking additional authorities. Without objection, Congress passed the 
5 


82427.002

U.S. SAFE WEB Act on December 6, 2006, and it was then signed into law by President Bush 

on December 22, 2006. 

Pursuant to the Act, the FTC issued a report in 2009, "The US. SAFE WEB Act: The First Three 

Years ", detailing its use and day-to-day experience with the authority granted by the law. 

Over a three-year period, covering 2006 through 2008, the FTC received more than a quarter of a 

million cross-border complaints by American consumers. The FTC also reported that it shared 

confidential information in response to 38 requests from 14 foreign agencies in six countries, 

resulting in numerous enforcement proceedings. 

By any measure, the U.S. SAFE WEB Act has been a clear success to date and should be 

reauthorized before its expiration next year. 

Let me emphasize an important point: Our goal is to pass a clean reauthorization of the law, and 

my draft legislation does exactly that. 

The U.S. SAFE WEB amends the FTC Act, authorizing the Commission to: 

Share information involving cross border fraud with foreign consumer protection agencies, 

subject to important safeguards; 

Protect from public disclosure confidential information received from foreign consumer 

protection agencies that otherwise would not be shared; 

Pursue a broader class of frauds, involving international activity that harms U.S. consumers; 

Seek redress on behalf of foreign as well as U.S. consumers victimized by U.S.-based wrongdoers; and finally 

Make criminal referrals for cross-border criminal activity when violations of FTC law also 

violate U.S. criminal law. This is necessary because some foreign agencies address consumer 

fraud as a criminal- rather than civil- law enforcement issue. 

Today, with nearly 1.5 billion credit cards now in use in the United States, nearly everyone in 

America has a stake in making certain that the Federal Trade Commission has the powers it 

needs to combat cross-border fraud, spam and spyware. 

In closing, let me emphasize, this is a very important bill, and I am asking for your favorable 

consideration as we begin the process of reauthorizing the U.S. SAFE WEB Act. It's good for 

American consumers. It's good for the future of e-commerce. And it's the right thing to do. 
6 


82427.003

[Discussion Draft] 

[DISCUSSION DRAFT] 

JUl,Y 3, 2012 

112TH CONGRESS H R 

2D SESSION 

• • 

To extend the Undertaking Spam, Spyware, And Fraud Enforcement With 

Enforcers beyond Borders Act of 2006, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

M_. introduced the following bill: which was referred to the 

Committee on __________ _ 

A BILL 

To extend the Undertaking Spam, Spywarc, And Fraud Enforcemcnt With Enforccrs beyond Borders Act of 2006, 

and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. EXTENSION OF THE U.S. SAFE WEB ACT OF 2006. 

4 Section 13 of the U.S. SAFE WEB Act of 2006 

5 (Public IJaw 109-455; 15 U.S.C. 44 note) is amended to 

6 read as follows: 

f:WHLCI0703121070312.027.xml 

July 3, 2012 (12:33 p.m.) 

(53143914) 
7 


82427.004

F:ISL w\SL W _042.xML [Discussion Draft] 

2 

1 "SEC. 13. SUNSET. 

2 "Effective September 30, 2020, this Act, and the 

3 amendments made by this Act, are repealed, and any pro4 vision of law amended by this A.ct shall be amended to 

5 read as if this Act had not been enacted into law.". 

f:WHLCI0703121070312.027.xml 

July 3,2012 (12:33 p.m.) 

(53143914) 
8 

OPENING STATEMENT OF HON. G.K. BUTTERFIELD, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NORTH 

CAROLINA 

Mr. BUTTERFIELD. Madam Chairman, I thank you for holding today’s hearing on reauthorizing the U.S. SAFE WEB Act of 2006. 

When the Act passed in the 109th Congress, it was overwhelmingly supported by both Republicans and Democrats, and it passed 

the House under suspension of the rules. The law provides the FTC 

with expanded and enhanced authorities with the aim to combat 

cross-border spyware and spam attacks against the United States, 

as well as to help protect consumers against phony Internet rip-offs 

and telemarketing scams. The enhanced authority has empowered 

the FTC to better protect American consumers through robust 

cross-border information sharing, investigative assistance and correlation-building with foreign consumer protection agencies. 

In a 2009 report to Congress, the FTC noted that ‘‘the Act has 

helped overcome cross-border enforcement challenges it faced in the 

past, and it is critical to the FTC’s ability to combat global scams 

that consumers will face in the future.’’ Simply put, the expanded 

authorities are working to protect the American people. 

The SAFE WEB Act included a sunset provision that will cause 

these enhanced authorities to expire in December of 2013 if Congress does not act. The proposed bill we are discussing today will, 

if passed, extend the law to September 2020. While I support these 

important consumer protection provisions being extended, I join the 

current commissioners of both political parties in calling for this reauthorization to be continued in perpetuity. 

I hope that my colleagues will agree that this law is paying dividends to the American people. Instead of including another sunset 

provision in any reauthorization, we should strongly weigh the 

unanimous support of the commissioners to make it permanent. 

I look forward to hearing from today’s witness from the Commission, Mr. Stevenson, and appreciate him being here today. 

Madam Chairman, I look forward to working with you and our 

colleagues on the subcommittee in fully authorizing this very important and successful law. Thank you. 

Mrs. BONO MACK. Thank you, Mr. Butterfield. 

And seeing no other members who wish to make opening statements, we will turn our attention to our one witness that is joining 

us today. We have Hugh G. Stevenson, Deputy Director for International Consumer Protection at the Office of International Affairs 

at the Federal Trade Commission. Thank you very much for being 

here. Mr. Stevenson has prepared an opening statement that will 

be placed into the record. He will now have 5 minutes to summarize his statement in his remarks. 

Again, thank you for coming. If you can just look at the little 

clock in front of you—it is a timekeeper, kind of typical American 

values—green means goes, yellow means start wrapping it up or 

hit the gas, and red means try to come to a conclusion. Please just 

remember to turn your microphone on and bring it close to your 

mouth so that the TV audience at home can hear you. 

And with that, Mr. Stevenson, you are recognized for your 5 minutes. 

9 

STATEMENT OF HUGH G. STEVENSON, DEPUTY DIRECTOR 

FOR INTERNATIONAL CONSUMER PROTECTION, FEDERAL 

TRADE COMMISSION 

Mr. STEVENSON. Thank you very much. Chairman Bono Mack, 

Ranking Member Butterfield, honorable members of this committee, my name is Hugh Stevenson. I am the deputy director for 

International Consumer Protection at the Federal Trade Commission, and I am here on behalf of the FTC to speak in support of 

renewing the U.S. SAFE WEB Act. 

As you know, part of our bread and butter is bringing enforcement actions to protect U.S. consumers from fraud, from deception, 

from other commercial misconduct. And more and more, these enforcement actions cross borders. The defendants can be in other 

countries, the money can go to other countries, the evidence can 

sometimes only be found in other countries. The SAFE WEB Act 

of 2006 has provided us with key enforcement tools we need more 

and more to do this bread-and-butter work. And as you have recognized, unless you take action, we lose the Act’s powers next year. 

Now, what does this problem—cross-border fraud—look like? If 

we look at our joint database and consumer sentinel, we see hundreds of thousands of cross-border complaints from your constituents. We see millions of robocalls sent from outside the United 

States. We have seen millions of bogus debt-collection calls. In our 

cross-border cases, we have seen hundreds of millions of dollars in 

injury to U.S. consumers. And in our spam work, in one case alone, 

we have seen billions of spam messages sent. 

Technology with a global reach has become even more prevalent, 

even more the new normal since 2006. The new technologies—and 

not just the web and email but increasingly also mobile devices— 

Smartphones, new methods of payment, voiceover IP, robocalls—all 

this means the frauds are faster, the frauds can reach farther, and 

the frauds are harder to discover. 

What does the SAFE WEB Act do to help us here? It helps us 

to work together with agencies in other countries to investigate and 

bring cases using our subpoena power to get information, share it, 

get more information back. Easy example: We subpoenaed information from a U.S. company and shared it with the Toronto Police 

Service, which was investigating a scam that was targeting both 

U.S. and Canadian consumers, helped link the suspects to the 

scam, led to 14 arrests. Another simple example, payday lender 

case: We shared information with a U.K. agency, they shared information with us, we filed an action in court and obtained a milliondollar settlement with U.S. and U.K. defendants. The SAFE WEB 

Act also confirms that we have jurisdiction to pursue these cases 

and helps us build networks so necessary with our fellow enforcers. 

Let me emphasize also what the SAFE WEB Act does not do. 

The Act does not set new substantive rules for business. It hasn’t 

given us any new substantive rulemaking powers. What it does is 

provide us with enforcement tools. 

The Act also does not cover every conceivable case. It limits cooperation to cases of fraud, deception, and other misconduct that 

is substantially similar to practices that already violate the FTC’s 

consumer laws. 

10 

The FTC has referred many times in many contexts over many 

years to the need for just this kind of legislation, and we need the 

SAFE WEB Act now more than ever to meet the challenge of effective protection for U.S. consumers. 

Thank you for your attention and I would be glad to answer any 

questions. 

[The prepared statement of Mr. Stevenson follows:] 

11 


82427.005

PREPARED STATEMENT OF 

THE FEDERAL TRADE COMMISSION 

on 

Reauthorizing the U.S. SAFE WEB Act of 2006 

Before the 

COMMITTEE ON ENERGY AND COMMERCE 

SUBCOMMITTEE ON COMMERCE, MANUFACTURING, AND TRADE 

UNITED STATES HOUSE OF REPRESENTATIVES 

Washington, D.C. 

July 12,2012 
12 


82427.006

I. INTRODUCTION 

Chainnan Bono Mack, Ranking Member Butterfield, and members of the Subcommittee, 

I am Hugh Stevenson, Deputy Director for International Consumer Protection at the Federal 

Trade Commission ("FTC" or "Commission,,).l I appreciate the opportunity to present the 

FTC's testimony in support of renewing the authority that Congress granted to the FTC in the 

U.S. SAFE WEB Act of2006. Without Congressional action, the Act will sunset in December 

2013. 

Congress passed the Undertaking Spam, Spyware, And Fraud Enforcement With 

Enforcers beyond Borders Act of2006 ("U.S. SAFE WEB Act," "SAFE WEB Act," or "Act"i 

to enhance FTC enforcement against cross-border fraud threatening American consumers in the 

global marketplace. The Act anns the FTC with key enforcement tools to combat Internet 

scams, fraudulent telemarketing, spam, spyware, and other cross-border misconduct that hanns 

our consumers. In this Act, Congress gave the FTC enforcement tools similar to those long 

available to the Securities and Exchange Commission and the Commodity Futures Trading 

Commission.3 

, The views expressed in this statement represent the views of the Commission. My oral presentation and responses 

to questions are my own and do not necessarily represent the views of the Commission or any Commissioner. 

2 Undertaking Spam, Spyware, And Fraud Enforcement With Enforcers beyond Borders Act of 2006 ("U.S. SAFE 

WEB Act"), Pub. L. No. 109-455, 120 Stat. 3372 (2006) (codified in scattered sections of 15 U.S.C. and 12 U.S.C. 

§ 3412(e». A copy of the public law is available at http://www.gpo.gov/fdsys/okgIPLAW-109pubI455/pdfIPLAWI 09publ455 .pdf. 

3 See Securities Acts Amendments of 1990, Pub. L. 101-550, 104 Stat. 2713 (1990); see also Futures Trading 

Practices Act of 1992, Pub. L. No. 102-546, § 302,106 Stat. 3590, 3622 (1992). Neither the SEC legislation nor the 

CFTC legislation contained a sunset provision. Accordingly, over the past 22 years, the SEC has used its crossborder enforcement powers to develop strong enforcement cooperation arrangements - including a multilateral 

memorandum of understanding under the auspices of the International Organization of Securities Commissions 

(lOSCO) - based on its statutory authority to collect and share investigatory information when there are suspicions 

of securities laws violations in foreign jurisdictions. This has allowed the SEC to pursue foreign securities frauds 

that harm American investors. The CFTC has engaged in similar efforts. Moreover, since passing the SAFE WEB 

Act, Congress has given similar authority to the Consumer Product Safety Commission. See Consumer Product 

Safety Improvement Act of2008 - Public Law 110- 314, codified at 15 U.S.C. § 2078. 

- 1 -
13 


82427.007

To continue to protect American consumers in a global economy, the FTC believes it is 

critical that Congress reauthorize the law enforcement tools provided by the U.S. SAFE WEB 

Act. Every FTC Commissioner who has addressed the issue three Democrats, three 

Republicans, and an independent - has supported reauthorization of the Act.4 

This testimony first describes the problem of cross-border fraud and provides a brief 

history of the Act. It then describes how the FTC has used the Act's enforcement tools to protect 

U.S. consumers, particularly in four key areas: (1) information sharing; (2) investigative 

assistance; (3) cross-border jurisdictional authority; and (4) enforcement relationships. Finally, it 

discusses the ongoing cross-border challenges and the continuing need for the SAFE WEB Act. 

II. THE CROSS-BORDER FRAUD CHALLENGE AND PASSAGE OF THE U.S. 

SAFE WEB ACT 

Globalization of trade, improvements in international telecommunications, outsourcing, 

and the advent of the Internet have created unprecedented new opportunities for consumers and 

businesses. But these developments have also posed new problems for the FTC and American 

consumers. The problems for American consumers, described in prior FTC testimony,5 have 

ranged from traditional scams that thrived online, such as pyramid schemes and business 

operations making false product claims, and aggressive advance-fee loan, foreign lottery, and 

sweepstakes telemarketing schemes, to Internet-enabled frauds like spoofed emails, web 

4 All five of the current Commissioners support reauthorization. Previously, in 2011, all five Commissioners then 

serving, including former Commissioner William Kovacic, wrote to the leadership ofthe FTC's authorizing House 

and Senate committees to urge renewal. In 2009, all four Commissioners then serving, including former 

Commissioner Pamela Jones Harbour, voted for the 2009 FTC report recommending reauthorization. Similarly, five 

Commissioners unanimously recommended passage of what became the SAFE WEB Act in a 2005 report to 

Congress. See discussion in section II, irifra. 

5 See Hearing on Internet Fraud Before the Comm. on Finance, 107th Congo (2001) (statement of the Federal Trade 

Commission), available at http://www.ftc.gov/os/2001l04/internetfraudstate.htm; Hearing on Internet Fraud Before 

the Subcomm. on Commerce, Trade, and Consumer Protection of the House Comm. on Energy and Commerce, 

107th Congo (2001) (statement of the Federal Trade Commission), available at 

http://www2.ftc.gov/os/2001l05/internetfraudttmy.htm; Hearing on Cross Border Fraud Before the Subcomm. on 

Investigations ofthe Sen. Comm. on Governmental Affairs, 107th Congo (2001) (statement of the Federal Trade 

Commission), available at http://www.ftc.gov/os/2001/06/cbftest.htm. 

-2-
14 


82427.008

addresses, and computer system scans. The challenges for the FTC and other law enforcers have 

included the global reach and speed of the Internet; the ability of scammers to cloak themselves 

in anonymity; the ease of moving ill-gotten gains to offshore asset havens; and the roadblocks to 

information sharing and cooperation created by national laws and borders.6 

Cross-border fraud is an ongoing problem. The FTC's Consumer Sentinel database, 

which combines consumer fraud complaints received by an array of enforcement agencies and 

other organizations,? suggests the scope of the problem: 

6Id 

• Between 2006 and 2011, almost haIfa million U.S. consumers (471,014) complained 

about transactions involving more than $1.4 billion paid to businesses in other countries.8 

• The number ofD.S. consumer complaints against foreign businesses exceeded 100,000 in 

2011 alone: 

Total Number of Complaints by U.S. Consume ... 

Against Companies In Fore"" Countries 

3J,ll1 

7 The Consumer Sentinel Network is a secure online database of millions of consumer complaints, available only to 

civil and criminal enforcement agencies, that provides immediate and secure access to fraud, identity theft, Internet, 

telemarketing (including Do Not Call), and other consumer-related complaints. See http://www.sentinel.gov. Note 

that complaints are included in the data by date of consumer complaint. Some organizations, however, transfer their 

complaints to the Consumer Sentinel Network after the end of the calendar year. As a result, reported totals and 

percentages may vary compared to previous years' reports. 

See Consumer Sentinel Network cross-border fraud reports for the calendar years 2002 to 2011, available at 

http://www.ftc.gov/sentinel/reports.shtml. 

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82427.009

• Cross-border complaints have accounted for more than 10% of all Consumer Sentinel 

fraud complaints every year since 2000, with a high of 22% in 2006 and 13% for each of 

the last three years. These numbers likely understate the scope of the problem, as this 

complaint count includes only those instances where consumers report a foreign address.9 

• U.S. consumers complain about foreign businesses from an increasingly broad range of 

countries. In 2002 more than 55% of such complaints were about Canadian businesses; 

in 20 II more than 85% were about businesses in other foreign countries.1O 

In 2005, the FTC sent a legislative recommendation to Congress to meet these challenges 

and enhance the FTC's enforcement against cross-border fraud. I I The FTC also submitted a 

report to Congress that detailed the types of misconduct involved and the harms its victims 

experienced. 12 On December 8, 2006, Congress passed the SAFE WEB Act,13 which was signed 

into law on December 22, 2006.14 The Act required the FTC to report on experience with the 

Act after three years, and included a seven-year sunset. IS 

In 2009, the FTC submitted the required three-year report to Congress, detailing how the 

agency had used its new authority under each provision of the Act to protect consumers in the 

global economy.16 The 2009 report noted the "significant role the Act has played in facilitating 

cross-border cooperation in investigations and enforcement proceedings, along with the growing 

need for continued cooperation to combat new and existing global fraud," and requested that 

9 In some instances the company address provided by the consumer actually is a mail drop in the consumer's country 

rather than the physical location of the company in a foreign country. In other cases, the consumer does not know 

whether the location is in the U.S. or abroad, for example in dealing with a website, email, or phone contact. 

10 See Consumer Sentinel Network cross-border fraud reports for 2011 and 2002, available at 

http://www .ftc.gov/sentinellreports/annual·crossborder-reports/crossborder-cy20 II.pdf and 

http://www.ftc.gov/sentinellreportslannual-crossborder-reportsIcrossborder-cy2002.pdf. 

II FTC, The US SAFE WEB Act- Protecting Consumers from Spam, Spyware, and Fraud:A Legislative 

Recommendation to Congress (June 2005), available at http://www.ftc.gov/reports/ussafewebIUSSAFEWEB.pdf. 12 [d. 

13 See Statement of Federal Trade Commission Chairman Deborah Platt Majoras on Passage of the US SAFE WEB 

Act by the 109th Congress, available at http://www.ftc.gov/speeches/maioras/0612IlstatementUSSafeweb.pdf. 

14 See Statement by Federal Trade Commission Chairman Deborah Platt Majoras on US SAFE WEB Act Being 

Signed Into Law by President George W. Bush, available at http://www.ftc.gov/opa/20061l2/safeweblaw.shtm. 

15 See Act, §§ 13,14. 

16 See FTC, The US. SAFE WEB Act, The First Three Years: A Report to Congress (Dec. 2009), available at 

http://www.ftc.gov/os/2009/121P035303safewebact2009.pdf. 

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Congress strike the sunset provision.17 Following this report, in October 2011 the FTC's five 

Commissioners submitted letters to congressional leaders, including to the leaders of this 

Subcommittee, urging repeal of the sunset provision and permanent reauthorization of the SAFE 

WEB ActY 

III. FTC USE OF SAFE WEB ACT TOOLS 

The FTC has used the SAFE WEB Act's tools to protect American consumers from 

cross-border threats robustly and responsibly. Some numbers tell the story: 

• The FTC has conducted more than 100 investigations with international components, 

such as foreign targets, evidence, or assets, and has filed more than 50 cases involving 

cross-border components, since January 2007. The FTC has used the Act's authority in 

many of these matters, and in related actions brought by other U.S. and foreign 

enforcement agencies. 

• The FTC has provided evidence in response to 63 information-sharing requests from 17 

foreign law enforcement agencies in nine countries as ofmid-2012. This evidence 

sharing was possible only because of the authority granted by the Act. 

• The FTC has issued 52 civil investigative demands (equivalent to administrative 

subpoenas) in 21 investigations on behalf of nine agencies in five countries, agencies that 

in many cases were investigating frauds targeting Americans. 

• In cases relying on the SAFE WEB Act, the FTC has to date collected more than $10 

million in restitution for injured consumers, despite the challenges of collecting money 

from defendants in foreign jurisdictions, and has stopped frauds costing American 

consumers hundreds of millions of dollars. 

Even more important, the Act is key to strengthening a culture of mutual assistance that 

enables law enforcers to achieve greater results working together than they ever could alone. 

Tracing cause and effect in each case of cooperation and reciprocity is difficult, but one example 

of such cooperation and resulting enforcement actions is Operation Tele-PHONEY. There the 

17 !d. at 20. 

IS See Commission Letter to the Honorable Fred Upton, Henry Waxman, Mary Bono Mack, and G.K. Butterfield, 

U.S. House of Representatives Committee on Energy and Commerce, Requesting Repeal of the Sunset Provision of 

the U.S. SAFE WEB Act 0[2006 (Oct. 3, 2011), available at 

http://www.ftc.gov/os/closingsIl11003safeweblettercongress.pdf. 

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FTC, armed with SAFE WEB Act authority, worked together with U.S. and Canadian law 

enforcers to orchestrate a telemarketing enforcement sweep with 180 actions overall, including 

criminal actions against more than 90 defendants and several Canadian actions. Moreover, the 

13 FTC actions brought as part of the sweep involved more than half a million consumers 

defrauded by unscrupulous telemarketers, resulting in losses of more than $100 million, and the 

agency estimated that as a result of the law enforcement actions consumers would save 

approximately $30 million over the following year.19 Another example is the work of the 

Toronto Strategic Partnership, which includes the U.S. Postal Inspection Service, the Royal 

Canadian Mounted Police, and other Canadian civil and criminal enforcement agencies, which 

since 2000 has involved hundreds of arrests, hundreds of search warrants, and the shutting down 

of scams cheating U.S. and foreign consumers out of hundreds of millions of dollars.20 The 

SAFE WEB Act enables the FTC to cooperate more fully in this kind of crucial partnership 

activity. 

This cooperation has directly benefited U.S. consumers. The Act has improved the 

quantity and quality of evidence that the FTC can use against common targets, and has 

encouraged reciprocal assistance from enforcement agencies in other countries, especially 

Canada, which in 2010 passed a law with mutual assistance provisions modeled on the SAFE 

WEB ACt.21 This enables the FTC to act more quickly and effectively in shutting down 

19 See http://www.ftc.gov/opai2008/05Itelephoney.shtm. 

20 See http://www.ftc.gov/opai2008/0Ilcanada.shtm. 

21 The Canadian law, which vests three agencies with powers to cooperate on fraud, deception, spam, and privacy, 

was passed in December 20 I 0 and is expected to enter into force later this year. More infonnation is available from 

the Government of Canada at http://fightspam.gc.caieic/site/030.nsf/eng/home. At the time the Canadian legislation 

was under consideration, Canadian officials cited the U.S. SAFE WEB Act as a model for the type oflegislation that 

was required for effective international cooperation. See Konrad von Finckenstein, Chainnan, Canadian Radiotelevision and Telecommunications Commission, Speech to the Standing Committee on Industry, Science, and 

Technology (June 18, 2009), available at http://www.crtc.gc.caieng/com200/2009/s090618.htm (advocating for an 

amendment that would give his agency power to obtain and share infonnation with authorities in foreign countries, 

such as the United States, that have reciprocal legislation). 

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egregious frauds and putting the defendants out of business and under court order, while at the 

same time helping foreign agencies to bring actions against foreign-based fraudsters that 

victimize American consumers. 

The Act in particular enhances the FTC's consumer protection enforcement authority22 in 

four key areas: (I) information sharing; (2) investigative assistance; (3) cross-border 

jurisdictional authority; and (4) enforcement relationshipsP 

A. Information Sharing 

The Act authorizes the FTC to share confidential information in its files with foreign law 

enforcement agencies, subject to certain statutory safeguards.24 This enforcement tool has 

proven particularly useful. 

In one of the first uses of this enforcement tool, the FTC shared evidence with enforcers in 

Australia and New Zealand about an international spam network that peddled bogus prescription 

drugs, weight-loss pills and male-enhancement products to U.S. and foreign consumers. The 

network, which the anti-spam organization Spamhaus called the largest "spam gang" in the world, 

sent billions ofspam emails.25 Using this evidence, the New Zealand agency executed multiple 

search warrants, filed an enforcement action in New Zealand, and obtained several monetary 

settlements. The Australian agency also filed suit, obtaining injunctions and a $210,000 penalty from 

an Australian court. In turn, these actions helped the FTC obtain further evidence and nearly $19 

22 The Act's enforcement tools are not available for competition cases. See Act, §§ 4 (b), 6 (a). 

23 The Act also contains important confidentiality-related provisions and other enforcement tools enhancing the 

FTC's ability to work with both U.S. and foreign agencies, as detailed in the agency's 2009 report to Congress. 

24 See 15 U.S.c. §§ 46(1), 57b-2(b)(6). The foreign agency must fall within the FTC Act's definition offoreign law 

enforcement agency. See 15 U.S.C. § 44 (defining "law enforcement agency" as "any agency ... of ... a political 

subdivision of a foreign state ... that is vested with law enforcement or investigative authority in civil, criminal, or 

administrative matters"). The requesting agency must certify that the information will be maintained in confidence 

and will be used only for official law enforcement purposes. Also, the requested material may only be used in 

connection with investigation and enforcement targeting possible violations of laws prohibiting fraudulent or 

deceptive commercial practices, or other practices substantially similar to practices prohibited by a law administered 

by the FTC. 

25 See Spamhaus News, available at http://www.spamhaus.org/newsiarticlei638Iherbalking-principals-indicted-byftc-and-new-zealand. 

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82427.013

million in default restitutionary judgments in its own civil case, and led to the criminal conviction of 

one of the defendants.26 As the Australian agency put it, "This type of inter-agency, crossjurisdictional collaboration is exactly what is required to combat the global scourge of spam.'.27 

More recently, the FTC used the Act's information sharing provisions to help build its case 

against a Canadian and several related defendants who victimized nearly four million consumersmost of them Americans. The FTC alleged that the defendants lured consumers with "free" trial 

offers for weight-loss pills, teeth whiteners, health supplements, a work-at-home scheme, access to 

government grants, free credit reports, and penny auctions, and then charged them substantial and 

recurring fees on their credit cards. The FTC used the SAFE WEB Act to share information about 

the case with Canadian law enforcers, including the Competition Bureau and the Royal Canadian 

Mounted Police, which in tum provided investigative assistance to the FTC. The case resulted in the 

entry of U.S. court injunctions and monetary judgments.28 

B. Investigative Assistance 

The Act also permits the FTC to provide investigative assistance in consumer protection 

matters to foreign law enforcement agencies for fraudulent and deceptive commercial practices, 

and other practices "substantially similar" to those prohibited by FTC law.29 If such requests 

meet the requirements of the Act,30 the FTC may issue compulsory process for documents or 

26 See FTC v. Atkinson, No. OS-CV -5666 (N.D. Ill., filed Oct. 6, 200S), press release available at 

http://www.ftc.gov/opal200S/10Iherbalkings.shtm. 

27 Australia Communications and Media Authority, "Penalties awarded in email spam Case in the Federal Court" 

(Dec. 22, 2009), available at http://www.acma.gov.auIWEB/STANDARD/pc=PC 31199S. 

28 FTCv. Jesse Willms, No. 2:II-CV-0082S (W.D. Wash., filed May 16,2011). Complaint and other court papers 

available at http://www.ftc.gov/os/caselisV1023012/index.shtm. The settlement order with the Canadian defendant 

imposes ajudgment of$359 million, to be suspended upon Willms' surrender of bank account funds and proceeds 

from the sale of his house, personal property, and corporate assets, including a Cadillac Escalade, fur coat, and 

artwork. 

29 See 15 U.S.C. § 460). 

30 Requests for investigative assistance pursuant to SAFE WEB must be made in writing, and the foreign agency 

must state that it has an investigation or enforcement proceeding involving possible violations oflaws prohibiting 

(I) fraudulent or deceptive commercial practices or (2) other practices substantially similar to practices prohibited 

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testimony to a U.S. entity (often a third party, such as a domain registrar) and share the 

information with the foreign agency. Before the Act was passed, the FTC could not provide such 

assistance - even if the foreign agency was investigating a fraud, or helping the FTC to 

investigate a fraud, that victimized U.S. consumers. 

An example of how this enforcement tool has helped U.S. consumers comes from an 

Edmonton (Canada) Police Service investigation of Hazim Gaber, a Canadian who peddled 

cancer cure scams mainly to U.S., Canadian, and U.K. citizens. Gaber claimed to sell an 

experimental cancer drug, but actually sent victims a useless white powder. Using the Act's 

investigative assistance provisions, the FTC obtained evidence from a U.S. domain registrar that 

helped tie Gaber to websites associated with the scam. Ultimately, the FBI arrested Gaber in 

Germany and extradited him to the U.S. In March 2010, Gaber pled guilty to five counts of wire 

fraud for selling counterfeit cancer drugs. He was sentenced to 33 months in prison and three 

years of supervised release.3

! 

C. Cross-Border Jurisdictional Authority 

The SAFE WEB Act also provides enhanced litigation tools. Key among them is the 

Act's confirmation of the FTC's cross-border jurisdictional authority. The Act amended the core 

jurisdictional provisions in Section 5 of the FTC Act to confirm the agency's authority to 

by any provision of the laws administered by the Commission. 15 U.S.C. § 46(j)(1). The Act also requires that the 

Commission consider all relevant factors, including; (I) whether the agency has agreed to provide or will provide 

reciprocal assistance to the Commission; (2) whether the request would prejudice U.S. public interest; and 

(3) whether the foreign agency's investigation or proceeding concerns acts or practices that cause or are likely to 

cause injury to a significant number of persons. See 15 U.S.c. § 46(j)(3). Finally, section 6(j)(1), (6)-(7) of the FTC 

Act, 15 U.S.C. § 46(jXl), (6)-(7), also sets forth exceptions to the Commission's authority to render investigative 

assistance to foreign law enforcement agencies. The Act prohibits the Commission from providing investigative 

assistance if: (1) the foreign agency's investigation or enforcement proceeding involves the enforcement of antitrust 

laws; (2) the targets of the foreign agency's investigation or proceeding are banks, savings and loan institutions, 

federal credit unions, or common carriers; or (3) the agency is from a foreign state that the Secretary of State has 

determined repeatedly provides support for acts of international terrorism. 

31 See Department of Justice Press Release, "Canadian Man Sentenced to 33 Months in Prison for Selling 

Counterfeit Cancer Drugs Using the Internet," available at http://www.justice.gov/opa/pr/2010/AugustiI0-crm958.html. 

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challenge both frauds from abroad that harm U.S. consumers and frauds involving material 

conduct in the United States, including those that victimize foreign consumers.32 The 

amendment also confirms the availability of monetary restitution to consumers as a remedy for 

domestic and foreign victims of FTC Act violations.33 

These provisions are crucial to the FTC's ability to sue foreign defendants who harm U.S. 

consumers, helping the FTC to overcome arguments about the scope of its cross-border 

consumer protection jurisdiction. In FTC v. Innovative Marketing, Inc}4 for example, the FTC 

alleged that defendants used "scareware" to trick millions of consumers around the world into 

thinking malicious software had infected their computers, then sold them software to "fix" the 

non-existent problem. The foreign defendants argued that the FTC did not have jurisdiction over 

them, and thus could not seek return of their assets to the United States. The FTC invoked the 

SAFE WEB Act amendments in response: "Because the FTC is specifically empowered to 

redress foreign victims, the defendants' argument that funds derived from defrauded foreign 

consumers are immune from repatriation must fail.,,35 The Court agreed, and the FTC eventually 

recovered $8.2 million from one of the key defendants, who was based in Canada. The FTC has 

used this money to send out refund checks to more than 300,000 consumers for consumer 

redress.36 

The Act's jurisdictional provisions are even more critical in light of the Supreme Court's 

2010 decision in Morrison v. National Australia Bank Ltd.37 The Court there held that the SEC 

32 15 U.S.C. § 45(a)(4)(A)(i), (ii). 

33 IS U.S.C. § 45(a)(4)(B). 

34 FTC v. Innovative Mktg., Inc., No. RDB 08CV3233 (D. Md., filed Dec. 2, 2008), initial press release available at 

http://www.ftc.gov/opal2008/winsoftware.shtm. 

35 Plaintiff's Consolidated Reply to Sam Jain and Kristy Ross's Opposition to the FTC's Motion for an Order 

Holding Sam Jain and Kristy Ross in Contempt of Court and Requiring Repatriation of Their Assets in FTC v. 

Innovative Mktg, Inc., No. RDB 08CV3233 (D. Md., filed Mar. 3, 2009) (internal citations omitted). 

36 See http://www.ftc.gov/opal2011/12/rebates.shtm. 

J7 130 S. Ct. 2869 (2010). 

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82427.016

Act did not have extraterritorial effect, and therefore could not apply to the sale of foreign 

securities outside the United States. Though the case involved only private parties, the Morrison 

decision also presented hurdles to the SEC's ability to sue foreigners selling securities to U.S. 

citizens. Congress therefore promptly amended the law to provide that the SEC could bring 

cases involving transnational securities fraud. 38 

The FTC Act, before the SAFE WEB amendments, contained jurisdictional language 

similar to that in the SEC Act. Though the ultimate effect of Morrison on the FTC's jurisdiction 

is not clear, there is a risk that the federal courts would not permit the FTC to pursue foreigners 

victimizing U.S. consumers if the SAFE WEB Act were to sunset. Without the power to sue 

foreign wrongdoers, the FTC's cross-border consumer protection enforcement would be 

crippled. 

D. Enforcement Relationships 

Finally, the Act strengthens the FTC's enforcement relationships with foreign agencies. 

In particular, the Act authorizes the FTC "to retain or employ officers or employees of foreign 

government agencies on a temporary basis as employees of the Commission.,,39 With this tool, 

the FTC created an International Fellows Program so that foreign agency officials can work sideby-side with FTC staff on investigations and cases, subject to appropriate confidentiality 

38 15 U.S.C § 77v(c). The SEC Act, as amended, now confers on federal district courts jurisdiction over actions 

involving: (1) conduct within the United States that constitutes significant steps in furtherance of the violation, even 

if the securities transaction occurs outside the United States and involves only foreign investors; or (2) conduct 

occurring outside the United States that has a foreseeable substantial effect within the United States. These 

jurisdictional provisions do not contain a sunset provision or any other time limitation. See also Study on the CrossBorder Scope of the Private Right of Action Under Section lO(b) of the Securities Exchange Act of 1934 by the Staff 

of the U.S. Securities and Exchange Commission at 6, available at httn:llwww.sec.govlnewslstudiesI20121929ystudy-cross-border-private-rights.pdf (by this amendment "Congress restored the ability of the Securities and 

Exchange Commission ("Commission") and the Department of Justice ("DOJ") to bring enforcement actions under 

Section 1 O(b) in cases involving transnational securities fraud"). 39 15 U.S.C. § 57c-1. 

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82427.017

restrictions and security measures.40 This kind of arrangement is key to establishing trust and the 

understanding between agencies on basic functions crucial to developing meaningful case 

cooperation. 

A standout example of this program was the work done by a Fellow from the FTC's 

Canadian counterpart agency in connection with "Operation Tele-PHONEY," described earlier. 

As part of this enforcement sweep against deceptive telemarketers, the Fellow played a key role, 

working at FTC offices on investigations and facilitating close coordination and reciprocal 

assistance between her agency and the FTC on several cases. The resulting sweep counted 180 

civil and criminal actions by the FTC, the Canadian agency, and various other enforcement 

partners.41 Building these kinds of enforcement relationships is more important than ever, as the 

range of foreign countries involved in the agency's work continues to grow. 

IV. CROSS-BORDER CHALLENGES AND THE CONTINUING NEED FOR U.S. 

SAFE WEB ACT AUTHORITY 

Despite the FTC's successes in using the SAFE WEB Act, cross-border fraud remains a 

significant problem for U.S. consumers. Though overall percentages of cross-border complaints 

have remained steady in the past few years, U.S. consumers and the FTC are facing new and 

emerging cross-border challenges. For example, whereas much of the cross-border fraud in the 

1990s involved telemarketing from Canada, newer threats to U.S. consumers are coming from all 

over the world. This general trend appears, for example, in the percentage of Consumer Sentinel 

cross-border complaints that involve companies in countries other than Canada: 

40 To date, the agency has hosted 48 international foreign officials, 13 of them working on some aspect of the 

consumer protection mission. The officials have come from Argentina, Austria, Australia, Brazil, Canada, China, 

Colombia, Egypt, the European Commission, France, Hungary, India, Israel, Kazakhstan, Mauritius, Mexico, Peru, 

Poland, Singapore, South Africa, South Korea, Switzerland, Tanzania, Turkey, United Kingdom, and Vietnam. 

Fellows have also made significant contributions to the FTC's competition work, as this provision of the Act, unlike 

other sections, also covers the agency's competition mission. 

41 See http://www.ftc.gov/opa/2008/05/telephoney.shtm and http://www.competitionbureau.gc.ca/eic/site/cbbc.nsf/eng/02677.html. 

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82427.018

"'" 

COMPLAINTS BY U.S. CONSUMERS AGAINST COMPANIES LOCATED IN 

CANADA VERSUS OTHER FOREIGN COUNTRIES 

Ptl'coot of Com¢*mt$ Aillh\lt 

COmJ)4"* U'I OtMr F~n COUfltf~ 

Several recent FTC cases illustrate this trend. In the past few months, the FTC filed cases 

involving "phantom" debt collection frauds, which appear to be based in India, targeting 

hundreds of thousands of financially vulnerable U.S. consumers to collect debts the consumers 

did not owe to the defendants or did not owe at all.42 One of these cases was recently featured on 

ABC News' Nightline.43 This is consistent with the 2011 complaint data in Consumer Sentinel, 

which shows India as the sixth most frequent location of companies complained about, after the 

United States, Canada, the United Kingdom, Nigeria, and Jamaica.44 Another FTC case involved 

more than six million pre-recorded "robocalls" sent to U.S. consumers through facilities in the 

42 See FTC v. Broadway Global Master, Inc., No. 2:12-CV-00855 (E.D. CaL, filed Apr. 3, 2012), initial press 

release available at http://www.ftc.goy/opal2012/04Ibroadway.shtm;FTCv.AmericanCreditCrunchers.No. 

12cyI028 (N.D. ilL, filed Feb. 13,2012), initial press release available at http://www.ftc.goY/opal20I2/02/acc.shtm. 

43 Phantom Debt Collectors From India Harass Americans, Demand Money (June 7, 2012), available at 

http://abcnews.go.comlBlotter/phantom-debt-collectors-india-harass-americans-demand-money/story?id=16512428. 

44 Consumer Sentinel Network Data Book for January-December 2011, available at 

http://www. ftc.goY/sentinelireports/ sentinel-annual-reports/sentinel-cy20 II.pdf. 

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82427.019

Philippines, by defendants with principals and employees in the Philippines and in Thailand.45 

Further complicating these challenges is the fact that not just wrongdoers, but also evidence and 

assets, can be located around the globe. 

Reauthorization of the Act would enable the FTC to continue its current cross-border 

enforcement efforts and deal with new threats to U.S. consumers emanating from a growing 

number of jurisdictions. Like the SEC, CFTC, and CPSC, the FTC needs these enhanced 

enforcement tools to carry out its mission of protecting American consumers. 

V. CONCLUSION 

We urge Congress to promptly reauthorize the SAFE WEB Act, and we look forward to 

working with this Subcommittee on its proposed legislation. 

45 See FTC v. Navestad, No. 09-CV-6329 (W.n.N.Y., filed June 25, 2009), available at 

http://www. f/c.gov/oslcaselistl09 2 3 099/index.shtm. 

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26 

Mrs. BONO MACK. Mr. Stevenson, I think that is a world record. 

Good job. So I will recognize myself for 5 minutes for questioning. 

And again, thank you for your testimony. 

Can you just give us sort of a worst-case scenario of what exactly 

happens or could happen if you lose this authority that you are 

granted under this U.S. SAFE WEB Act? 

Mr. STEVENSON. Well, first and foremost, we would lose the enforcement tools of investigation and information sharing that we 

use now increasingly, frequently, to work with these other agencies. That means we would be less effective in a number of these 

cases. It would take more time to do these cases or, in some cases, 

we just couldn’t bring the cases at all. We also wouldn’t be in the 

position we are now to assist agencies in other countries that often 

are acting on investigations—take the Toronto example I mentioned—to protect U.S. consumers. And so we lose that benefit as 

well. 

Mrs. BONO MACK. Can you talk a little bit about what the consumer might see rather than in the halls of the FTC? What do you 

think will happen? What would the consumer see, perhaps, if you 

cease to have these opportunities under this Act? 

Mr. STEVENSON. Well, the consumer is going to have more and 

more of these kinds of challenges as we see it. Just by carrying 

around our Smartphone, you know, we can be spammed and 

spimmed and spear phished and robocalled and just ripped off, and 

that is from anywhere in the world. And so the challenge is, what 

can we do and step in to deal with these problems? There are some 

things that we can try to continue to do as we did before the Act, 

but we are simply not in the position to be as effective as we are 

now. 

Mrs. BONO MACK. How did you pursue these things before the 

Act? 

Mr. STEVENSON. Well, we could share limited forms of information, consumer complaint information, for example, under our statute. We could bring our own actions and coordinate as well as we 

might with agencies in other countries. But we weren’t in the position, really—which is so critical—of being able to share information, particularly as the investigation goes on. Sometimes we don’t 

even know where the fraud is located when we start the investigation. Neither do some of our counterparts. So some of it is just that 

challenge of even finding the people we want to go after. 

Mrs. BONO MACK. Was the FTC ever denied from bringing cases 

prior to SAFE WEB? 

Mr. STEVENSON. There are certainly cases that I think it is fair 

to say would have been very difficult if not impossible to investigate for that kind of reason. When we would come to the border 

in terms of information, if the evidence is somewhere else—for example, the domain name registrar information about who is behind 

a Web site was somewhere else and we didn’t have a way to get 

at it without using these powers, or maybe an agency that was 

working with us didn’t have the ability to get at it because we were 

able to assist them—that kind of thing could shut down investigations. It is a matter of degree of how fast and how well we can 

bring these cases in terms of developing the evidence, but fast is 

important here because fraud is even faster. 

27 

Mrs. BONO MACK. Thank you. And turning to something that we 

all care deeply about in this town, and that is the amount of money 

it costs. CBO originally scored U.S. SAFE WEB at $9 million over 

5 years from 2006 through 2011. Do you believe that that score was 

accurate, and if not, do you know how much the activities pursued 

under the U.S. SAFE WEB authority have cost? 

Mr. STEVENSON. Well, it is difficult to provide an exact estimate 

since these authorities are all intertwined with the FTC Act. And 

indeed, a lot of these tools are part and parcel of this sort of ongoing enforcement activity. Since we don’t do our budget items by 

statute, it is hard to parcel all of that out. 

Having said that, I would also add there was no specific appropriation for SAFE WEB when it was enacted and we did the implementation work, for example, in the beginning without an additional—beyond our regular appropriation. In terms of the $9 million figure, while there are various ways 

in which, depending on exactly what one counts in calculating this, 

we think under any reasonable calculation it would be significantly 

less than 9 million. Probably less than half that would be the cost 

attributable to this. The fact is a lot of it is just that we were able 

to do the same work but better, and we were able also—and bearing in mind not only the costs here but the benefits—to stop more 

frauds involving tens of millions of dollars, even recover money in 

some cases that we may not have recovered otherwise. 

Mrs. BONO MACK. Thank you. Doing the same work but better, 

would you say your office has grown larger or small since the passage of the SAFE WEB Act? 

Mr. STEVENSON. The Office of International Affairs has, I think, 

grown a little larger. But looking at it from the point of view of the 

FTC, as I said, the work was generally done within the appropriation envelop that we had when we were doing the first implementation. The other thing I might mention is that some of the costs that 

we have here such as doing the report, such as writing the internal 

procedural rules to implement this, would not be necessary to repeat as we go forward. 

Mrs. BONO MACK. Thank you very much. 

I am going to recognize Mr. Butterfield for 5 minutes. 

Mr. BUTTERFIELD. Thank you, Madam Chairman. 

In your testimony, Mr. Stevenson, you mentioned spammed, 

spimmed, and spear phish. I know what spam means but I don’t 

know the other two. Would you elaborate on those two? 

Mr. STEVENSON. Well, I think spim is sort of like the spam equivalent but in terms of messaging on phones. Phishing spelled with 

a ‘‘ph’’ is the idea that you might get the message from Wells Fargo 

Bank saying we have a problem with your account, please sign in 

here with your account details, when in fact it is somebody else trying to—— 

Mr. BUTTERFIELD. Um-hum. 

Mr. STEVENSON [continuing]. Steal those. And spear phishing is 

using some particular information that they may know about you 

to make the phishing even more effective. 

Mr. BUTTERFIELD. All right. I have learned something. All right. 

You also indicate that the full commission—I believe there are five 

of you on the Commission, Democrats and Republicans—that the 

28 

five of you have twice called on Congress to completely repeal the 

sunset provision. Are you reflecting a sentiment that is part of the 

record or are these the informal feelings of the commissioners? 

Mr. STEVENSON. The Commission in its 3-year report to Congress 

did request the repeal of the sunset provision. 

Mr. BUTTERFIELD. And that opinion is unanimous among your 

colleagues? 

Mr. STEVENSON. Yes, as I understand. 

Mr. BUTTERFIELD. All right. Can you please discuss with us some 

of the disadvantages to renewing these authorities for only 7 years, 

some of the disadvantages? 

Mr. STEVENSON. Well, one issue that arises is that as the time 

comes for the provisions to expire that obviously investigations can 

take months, cases can take years, and as we get closer to the end 

of the time available to us, then the time left on the statute, so to 

speak, is less than the time that we need to pursue those cases. 

It also does affect, of course, the end of the sunset period and the 

potential willingness of others to cooperate with us. Underlying a 

lot of this is developing this kind of cultural reciprocity of going 

back and forth, and obviously we want to be in the position as 

strongly as we can to assure our partners that indeed we will be 

in the position to reciprocate just as we expect that they will be. 

Mr. BUTTERFIELD. And the opposite of that, can you think of any 

benefits to sunsetting at 7 years? 

Mr. STEVENSON. Well, the process of oversight—obviously, I defer 

to you on the possible benefits of oversight. I would emphasize here 

that the type of law that we are dealing with here involves not the 

kind of substantive rules but more of the enforcement tools that 

the need for which we don’t expect to be going away any time soon. 

Mr. BUTTERFIELD. And finally, can you please discuss with us 

why it is important to reauthorize the Act now and not wait until 

sometime closer to December 2013? In particular, can you please 

address how delaying this reauthorization might affect your international investigative and enforcement efforts? 

Mr. STEVENSON. Well, mostly for the reasons that I mentioned. 

In terms of particular investigations in cases, as we get closer to 

the time that it expires, the time for which we exercise these powers may run out before the investigation is completed, for example. 

So that is one kind of concern. We do have the power also under 

the Act to negotiate formal agreements where those are necessary 

according to the opposite side’s law, which they aren’t always required. But we have been negotiating some of those. It is difficult 

to pursue negotiations of that sort as we get very close to the end 

of a sunset period, and so that is why we are requesting a prompt 

renewal. 

Mr. BUTTERFIELD. Can you please discuss what kinds of complaints by and frauds against the U.S. consumer you are seeing 

originating in other countries? 

Mr. STEVENSON. We see all manner of frauds. As I say, the technology these days means the communications can come from anywhere and the money can go anywhere, so we see pretty much the 

full range of frauds and deceptions. I would say that they tend to 

be the particularly egregious ones that we have seen or certainly 

29 

that we have acted on when we are dealing with the cross-border—— 

Mr. BUTTERFIELD. But Canada is in the number one position, are 

they not? 

Mr. STEVENSON. Canada has been historically where we have 

seen the most complaints going back to the 1990s where we saw 

extensive telemarketing issues. One of the interesting trends is 

that more and more though we see other countries involved. And 

so in the testimony we gave the example of these bogus debt collection calls from India and we had two cases there, the robocall case 

that used facilities in the Philippines to send complaints, and we 

are seeing a larger and larger percentage of the cross-border fraud 

complaints by U.S. consumers to involve these other countries. We 

also have a range of countries where we have seen the money go 

and have tried to—— 

Mr. BUTTERFIELD. The U.K. is an example? Would the U.K. be 

an example? 

Mr. STEVENSON. The U.K. would be one of the—— 

Mr. BUTTERFIELD. Yes. 

Mr. STEVENSON [continuing]. Countries where we have seen the 

numbers. We do about a 100-page report a year from our Consumer 

Sentinel Database, which is combined data from the FTC, the FBI, 

the U.S. Postal Inspection Service, Better Business Bureau, various 

Canadian sources, and we have seen in that data an increase in 

frauds from other countries so that the largest number would be 

from Canada, for example. But then the United Kingdom would be 

after that, Nigeria, Jamaica, India, Spain, China, Mexico, and 

Ghana would be the top ones in terms of complaints. Obviously, the 

complaint data doesn’t give us a precise calculation of what is happening out there, but it is certainly indicative of general trends. 

Mr. BUTTERFIELD. Thank you. 

Mrs. BONO MACK. Thank you, Mr. Butterfield. 

The chair now recognizes Dr. Cassidy for 5 minutes. 

Mr. CASSIDY. Good morning, Mr. Stevenson. I am a doctor so as 

I was reading your testimony I was struck by some of the prosecutions or cooperations you have had regarding bogus medical products sold. So none of this is the challenge. All of this is for me to 

learn. We may have a restriction on the sale of a drug without a 

medical prescription but Mexico may not. So if the online pharmacy 

is originating a drug from Mexico—one, do you know that that 

pharmacy is based in Mexico, that online pharmacy; and two, do 

you get cooperation not just from Mexico but from any country for 

a statute which is U.S.-specific but doesn’t necessarily apply to 

their methods of dispensing drugs as one example? 

Mr. STEVENSON. Well, the powers the SAFE WEB Act give us, 

as I mention, are limited in the kinds of cases we can cooperate on, 

are ones where the law is substantially similar to practices that 

violate our Act. So in the case—— 

Mr. CASSIDY. Now, if Mexico does have a requirement that for 

controlled substances there be a physician’s prescription with their 

version of a DEA number and we have that same and someone is 

buying controlled substances from an overseas online pharmacy, 

would they cooperate with us on that regard? 

30 

Mr. STEVENSON. Well, it would require under our statute for us 

to cooperate with them that it would be substantially similar to 

practices that violate the FTC consumer law. So if we, the United 

States, might have such a provision, it wouldn’t give the FTC the 

power—— 

Mr. CASSIDY. I see. So it would have to be fraudulent. It couldn’t 

be, ‘‘Here is pure-grade morphine.’’ We would require a prescription—they do—but it is still being sold. It would have to be adulterated morphine. Yes. So if they were saying adulterated morphine, billing it as pure grade, you could prosecute? 

Mr. STEVENSON. Yes. If it was something that was a fraud, for 

example, and the large, large percentage of the cases that really 

have implicated SAFE WEB have been hard core fraud and deception. 

Mr. CASSIDY. So do you know those Web sites which are notorious for fraudulent sales? I mean do you have a roster, a registry 

of those Web sites? Wow, man, we are getting adulterated drugs 

from this particular Web site. 

Mr. STEVENSON. I think that the drug issues tend to be addressed more by other agencies, the FDA, for example—— 

Mr. CASSIDY. The only reason I raise that, though, is you mentioned a couple of—and I don’t have your testimony in front of me 

open now—— 

Mr. STEVENSON. Right. 

Mr. CASSIDY [continuing]. But you mentioned a couple of medical-type stuff, drugs-type stuff that you did prosecute on. 

Mr. STEVENSON. Yes. 

Mr. CASSIDY. So what would make those your jurisdiction if you 

will as opposed to someone else’s, FDA’s? 

Mr. STEVENSON. Right. Well, it is partly what we can cover with 

our law. Although the fraud provisions reach broadly, they 

wouldn’t reach everything. So another would be just in terms of allocating where the expertise lies for doing certain kinds of 

things—— 

Mr. CASSIDY. So you mentioned a—— 

Mr. STEVENSON [continuing]. For example, we are not in a position to do a medical analysis of drugs or—— 

Mr. CASSIDY. But you mentioned that there was a cancer agent 

that was sold that turned out to be nothing but white powder. 

Mr. STEVENSON. Yes. 

Mr. CASSIDY. So did you all prosecute that one or did the FDA? 

Mr. STEVENSON. In fact, in that case I think it was prosecuted 

by the Department of Justice and the FBI made the arrest. So that 

was in that case a criminal one. And that is actually an important 

point to emphasize, that we accomplish things with this law not 

only by bringing our own cases but where we can cooperate as appropriate with other authorities—— 

Mr. CASSIDY. So let me go back—— 

Mr. STEVENSON [continuing]. That may be more in a—— 

Mr. CASSIDY. I accept that, but I just have limited time—— 

Mr. STEVENSON. Sorry. 

Mr. CASSIDY [continuing]. And I might interrupt. I apologize. But 

again, do you have a registry, if you will, of Web sites that we 

know these are the bad actors, we are going to watch them for proVerDate Aug 31 2005 09:29 Aug 20, 2013 Jkt 037690 PO 00000 Frm 00034 Fmt 6633 Sfmt 6633 F:\11E533~1\112-16~1 WAYNE
31 

moting fraudulent products, and we are just going to hover over 

them, if you will? Do you keep such a list or does it just kind of 

randomly pop up that, wow, somebody saw white powder, called it 

a cancer cure? 

Mr. STEVENSON. Well, our cases can start in a number of ways 

but one major way is from looking at the complaint data that we 

get from consumers and from other agencies. 

Mr. CASSIDY. But I guess my specific question is do you monitor 

certain Web sites? You have a certain amount of complaints; a lot 

of them come back to a particular Web site. Does that go on your 

monitor-this-one-closely list? 

Mr. STEVENSON. As I say, we look at the complaints; we look at 

other factors that may influence whether the case is an appropriate 

one to bring. We usually don’t lack for potential targets. There are 

usually a lot of different fraud targets. 

Mr. CASSIDY. But somehow you are not answering my question—— 

Mr. STEVENSON. Sorry. 

Mr. CASSIDY [continuing]. Asking my question correctly. Intuitively I know that there are going to be some Web sites that you 

are able to identify as being particular bad actors in terms of 

purveying fraudulent material. Do they go on a watch-closely list 

or is it always generated from your complaints and it may be this 

Web site and it may be another next time? 

Mr. STEVENSON. I would say we do not have a watch-closely list 

as in the sense that you are describing. The other thing about that 

is that, in terms of Web sites, what we see is often fraud operators 

operate multiple fraud Web sites, move around quite a bit, use the 

process of registering them to use phony names and whatnot so 

that actually that is a chunk. But we do not have the list that you 

are asking about. 

Mr. CASSIDY. May I have one more question? The only thing in 

the medical sphere, people are obviously depositing prescriptions 

on the Web site and then they are getting refills. It is not a onetime, you know, buy a bicycle that whatever, whatever; it is, no, 

I want refills. So even in those sorts of pharmaceutical-oriented 

Web sites, do you find this constant changeover? 

Mr. STEVENSON. That, I am sorry, I don’t know the answer to 

that. 

Mr. CASSIDY. Thank you for your indulgence, Madam Chair. 

Mr. STEVENSON. Thank you. 

Mrs. BONO MACK. Thank you, Dr. Cassidy. 

And good morning, Mr. Gonzalez. You are recognized for 5 minutes. 

Mr. GONZALEZ. Thank you very much, Madam Chair. 

Mr. Stevenson, let me ask you. Democratic staff has prepared a 

memo, in essence, telling us what we would be reauthorizing, 

whether it is for a limited period of time or no restriction, but it 

says it exempts financial institutions, payment system providers, 

Internet service providers, telephone service providers, and domain 

name registrars, among others, from liability for voluntarily providing certain information to the FTC when they might otherwise 

be prohibited from sharing such information. Now, that is very important, is it not, that provision? 

32 

Mr. STEVENSON. Yes, that is one of the provisions in the SAFE 

WEB Act, yes. 

Mr. GONZALEZ. And the reason is there may not be any liability, 

but it definitely might interfere with the business relationships 

that some of these providers of this information have with customers that utilize their services? Would that be true? Now, they 

may be bad purpose, bad actors, but they still have a business relationship. What I am getting at is a very simple proposition, and 

that is surely not everyone is happy with this particular authority 

that you have. I agree that you should have the authority. I don’t 

think that we have to sunset the thing either and I commend the 

work that you have done. I just want to get at all of the different 

stakeholders because I think we are all in agreement that this is 

a good authority for you to have and we need to accommodate you. 

The question comes down to surely someone out there in the 

business community, in the Internet or in the stakeholders, business stakeholders have some concerns that they expressed to you 

regarding this authority and the exercise of it. So what is it out 

there in the business community that we might have some stakeholders, legitimate ones, that are complaining to you, the nature of 

the complaint, and your response? 

Mr. STEVENSON. Thank you. We have not had any complaints 

about this provision since the Act was passed. We did have concerns raised in the several years leading up to the passage of the 

Act about the scope and nature of this provision, and then accordingly, it was narrowed. You mentioned that this information can be 

shared in certain instances. The certain instances here really are 

focused on essentially where there is a third party that has some 

reason to believe there may be a fraud or a deception or a violation 

of our law going on, or they have reason to believe that they have 

information about money that is ours to recover. So it is focused 

on those instances where they essentially have some reason to say 

we have complaints, we have suspicious charged back rates, or in 

some manner they have information to say this is something that 

we should notify the authorities about. And the effect of the provision is really just aimed at the liability or, in this case, lack of liability for the act of notifying us. 

So we have not heard complaints about that since the Act was 

passed. It is something that is useful to us. It has not been as central as the information sharing and investigation, other provisions 

that I have already talked about. 

Mr. GONZALEZ. Now, as much is going out there in the Internet 

world, and you just indicated it has revolutionized just in the past 

couple of years the use of mobile devices and how people get information out there, tremendous opportunities for many good things 

and tremendous opportunities for many bad things, as happens. 

Bottom line, though, is the consumer needs to be protected and we 

need to educate the consumer. And the best thing always—and Dr. 

Cassidy probably would agree if he was here—and that is prevention. So what is it that the FTC does to educate the consumer, to 

protect them and so they don’t fall victim, so that then you are not 

there investigating and pursuing on the civil side and maybe DOJ 

pursuing things on the criminal side? What about education? 

33 

Mr. STEVENSON. We place a very high priority actually on education, have a number of different campaigns we have done, including with foreign partners in a number of cases. One example of an 

education campaign that I think we launched just this week if I am 

not mistaken involves, for example, the problem of robocalls, which 

we mentioned earlier. And so we have done videos to put out for 

consumers. We have robocall advice on what to do if you receive 

them if you are a consumer. We also have a robocall action plan 

with several items and several steps we are trying to take to alert 

consumers to the problems that they see. 

Another example is in the area of remittances, sending money 

back home to another country, and this is an issue that affects us 

as Americans, including when we don’t speak English. And so we 

have actually put that piece of advice in six different languages to 

make sure that we are reaching as many people as we can with the 

important messages. Some of these messages about the fraud prevention are not exclusively international obviously because it has 

become so much part of our sort of everyday life and the kind of 

thing we have to communicate to consumers. 

Mr. GONZALEZ. Thank you very much for your testimony. 

And I yield back, Madam Chair. 

Mrs. BONO MACK. Thank you. 

The chair recognizes Mr. Guthrie for 5 minutes. 

Mr. GUTHRIE. Thank you, Madam Chair. 

Thank you so much for being here today. I was trying to get kind 

of a better feel for the process that the FTC uses to engage in international cooperation to the SAFE WEB Act. So in SAFE WEB I believe parts of it are self-executing and there are other areas that 

you have to have Memorandums of Understanding with other countries. Can you walk through that process? What are the impediments of those Memorandums of Understanding? 

Mr. STEVENSON. Sure. Well, one of the things that the Act requires is, before we share information, that the other side certify 

that they have the law to keep the information confidential, that 

they are investigating laws that are fraud, deception, or something 

substantially similar to our statutes. 

Mr. GUTHRIE. Um-hum. 

Mr. STEVENSON. We have actually developed a sort of form, the 

checklist of the factors that we have to take into account. We have 

to look at whether their law meets that standard. Usually, it is 

fraud and deception as I mentioned and that part is straightforward. We also need to take into account the general public interest, the likelihood of reciprocity if we assist another party, and the 

amount of injury and the number of consumers affected. And we 

have to use our resources wisely in choosing where to provide that 

assistance. If we want to go and get investigative assistance, that 

needs to go through one of our commissioners to use that process. 

We don’t require a formal agreement in the formal sense in order 

to do that kind of cooperation, but there are some countries where 

their laws may require that. 

Mr. GUTHRIE. OK. 

Mr. STEVENSON. And in that event, then, we work with the State 

Department to develop the text to negotiate—in this case with the 

34 

European Commission and Canada where it appeared that their 

law would require a more formal arrangement. 

Mr. GUTHRIE. You mentioned other emerging threats like Jamaica and some other countries that aren’t European Commission 

or Canada—have the same kind of systems, I guess, that we have. 

I mean who are the big emerging threat countries and what are the 

impediments between us being able to work with them or them 

working with us I guess? I think you mentioned Jamaica earlier. 

Mr. STEVENSON. Right. Well, there can be several sort of issues. 

In some cases there may not be a clear counterpart agency for us, 

and that is why it is important that the authority enables us to cooperate not just with civil regulatory agencies but also criminal 

agencies. So that part is important to us. And in some cases, obviously, language is a certain kind of barrier, and others not so 

much. And the challenges can differ. And it does take time to develop the relationships. We want to make sure that we can trust 

the agency we are dealing with on the other side; they want to be 

able to trust us. So that is also part of the ongoing process. 

Mr. GUTHRIE. Is there like a top two or three countries that you 

are most concerned about—— 

Mr. STEVENSON. As I mentioned—— 

Mr. GUTHRIE [continuing]. International fraud that we are not 

able to really—— 

Mr. STEVENSON. Yes. 

Mr. GUTHRIE [continuing]. Get an agreement with or work with? 

Mr. STEVENSON. As I mentioned, the complaint data suggests 

that there are certain countries that are where there are a particularly large number of complaints. I think I mentioned India, Jamaica among them. The—— 

Mr. GUTHRIE. So there are large complaints with them and they 

are cooperating with us, or are there large complaints in those 

countries and we are really having trouble cooperating with them? 

Mr. STEVENSON. Well, we are working in a number of countries 

on further improving our relationship. As I say, it varies depending 

on also the state of their agency in that country, the degree to 

which we have had occasion to work with them before. 

Mr. GUTHRIE. I guess the question—the worst-offending countries, are they serious about it and want to get it fixed? Or this is 

just something that is not on their agenda? 

Mr. STEVENSON. Well, sometimes there is a challenge of making 

this high enough on the agenda from the point of view of the agencies in another country, and that is something then we also try to 

work on in our enforcement work and technical assistance work. 

Mr. GUTHRIE. Because location is not important. It is the web so 

people can just gravitate, and once you fix it in one country, it is 

going to gravitate to another. So I appreciate the struggle you are 

in and how difficult it is for what you are doing. And the anonymity of the web allows people to do things that we don’t want them 

to do. So I appreciate what you are doing. 

And I yield back. 

Mr. STEVENSON. Thank you. 

Mrs. BONO MACK. Thank you, Mr. Guthrie. 

Mr. Harper, you are recognized for 5 minutes. 

Mr. HARPER. Thank you, Madam Chair. 

35 

Thank you, Mr. Stevenson, for being here with us today. Your 

written testimony indicates that the Act authorizes the FTC to 

share confidential information with its foreign counterparts subject 

to certain safeguards such as restrictions on foreign governments’ 

use of information for a purpose other than the investigation that 

triggered the information request. Have you received any complaints of misuse of information? 

Mr. STEVENSON. Misuse by agencies in other countries? 

Mr. HARPER. Yes. 

Mr. STEVENSON. No, I don’t believe so. 

Mr. HARPER. OK. Are you aware of any such misuses of information whether you have received complaints about that or not? 

Mr. STEVENSON. No. 

Mr. HARPER. OK. Does the FTC have formal agreements with 

other nations to address information sharing, and if so, how many 

agreements are in place? 

Mr. STEVENSON. In terms of SAFE WEB Act agreements, we 

have no formal agreements. We have, dating from before the SAFE 

WEB Act, mostly some informal Memoranda of Understanding. 

And as I mentioned, we can cooperate case-by-case if they provide 

the required certifications of information. So we do have those 

kinds of arrangements. 

Mr. HARPER. Do the protections for information shared internationally closely resemble those for sharing with State attorneys 

general or are they different? 

Mr. STEVENSON. They are very similar. 

Mr. HARPER. OK. Are there any countries where you have shared 

information that did not have reciprocal information sharing agreements with the U.S.? 

Mr. STEVENSON. Well, as I said, we don’t have the formal agreements. One of the factors that we take into account in sharing is 

whether there is the likelihood of reciprocal assistance, and we do 

find that—I can’t think of an example where someone has indicated 

they will not provide that under any circumstances, and certainly 

generally they are more than happy to. And that is part of what 

we are trying to achieve. Sometimes they have their own legal restrictions on doing it. So if they didn’t have that ability to share 

everything back with us, we take that into account. But there are 

sometimes limited things they can do and other things they can’t. 

And we see the important issue as getting the bad buys. 

Mr. HARPER. Well, what are the conditions you look for or establish in order to share information? 

Mr. STEVENSON. Well, so, first and foremost, they provide the 

certification that they can maintain the information in confidence. 

They tell us the nature of their legal authority to do investigations. 

So we ask them under what authority are you pursuing a possible 

violation? So often they will cite to us their fraud statute, their deception statute, or whatever. Then, we will look at whether that 

complies with the statutory requirement, that it is substantially 

similar. We also would look at the general public interest, as I 

mentioned, the likelihood of reciprocity, and also whether there is 

real injury involved and whether there is a significant number of 

people. We don’t want to be doing this kind of work for, you know, 

one-off disputes obviously or even, you know, small disputes. 

36 

Mr. HARPER. You testified earlier that Canada recently enacted 

a law similar to our SAFE WEB. Does their law affect your ability 

to investigate or litigate fraud originating from Canada? 

Mr. STEVENSON. Yes, it does. We have seen that as a very positive development in testifying in support of the legislation, they are 

actually—the government official, the head, I think, of the FCC 

pointed to the experience of the SAFE WEB Act in the United 

States and the importance of that kind of reciprocal assistance. It 

hasn’t yet all played out. I don’t believe it is completely in effect, 

but we are already seeing the benefits. We have several Canadian 

agencies—the Competition Bureau, the CRTC, which is more like 

the FCC—have already detailed people to us to work with us under 

his cases and that has been very effective. 

Mr. HARPER. Are you doing anything to encourage other countries to enact similar laws to what Canada has done? 

Mr. STEVENSON. We had done work at the OECD on protecting 

consumers from cross-border fraud and deception focusing particularly on those kinds of practices and encouraging a consensus on 

the approach to be taken. And a number of the items in that OECD 

recommendation are reflected in the SAFE WEB Act and are indeed reflected in some aspects of European Union law and now in 

the Canadian provisions. Different countries have obviously variations on that theme, which is part of the challenge here of working it out so that the rails of the two train tracks fit together when 

they meet. 

Mr. HARPER. Thank you, Mr. Stevenson. 

I yield back. 

Mr. STEVENSON. Thank you. 

Mrs. BONO MACK. Thank you, Mr. Harper. 

Mr. Lance? OK. He waives his questions. 

Mr. LANCE. That is you, then. 

Mrs. BONO MACK. Then, it is me. All right. We are going to move 

to a quick second round of questions, and I recognize myself for 5 

minutes. 

If a foreign government—kind of continuing on in the same 

vein—if they are not interested in cooperating with the FTC, what 

can the FTC do about perpetrators in that nation? Do you ever pursue enforcement in such cases? And does the FTC ever obtain default judgments against absent foreign defendants? 

Mr. STEVENSON. Starting with the last one first, we do sometimes obtain default judgments. We have had cases where we have 

done that. There then becomes the challenge obviously of taking 

those to enforce them in some other country. We do work with the 

office of foreign litigation at the Department of Justice, which is 

another provision we haven’t had a chance to talk about in SAFE 

WEB Act. That does require the development of case law and the 

development of other arrangements for us to hire counsel to pursue 

the money. 

In some occasions, we can get the receiver, who is appointed in 

the case by the court, to take some action in another country by 

virtue of being the court-appointed trustee, if you will, to take action. So that is another possibility. 

Sometimes there are assets that are reachable in some other 

country even if the defendants are in some way not reachable. 

37 

Sometimes there are assets in the United States for some defendants but not others. So there are various of those kinds of measures that we can take, and it really is a case-by-case challenge how 

we handle that. 

Mrs. BONO MACK. Thank you. 

There have been a handle of U.S.-based large, multinational companies that have been the target of FTC investigations or legal action that have also been the subject of investigations, reviews, or 

legal actions abroad for the same activities. Has the FTC shared 

information gleaned from its legal actions here that has been used 

in international legal actions for the same activities? 

Mr. STEVENSON. The Act permits us to share information in our 

files with agencies in other countries that are doing investigations. 

We do take into account various public interest factors and do take 

into account whether the laws that they are investigating are substantially similar. So there might be some examples where the 

laws that they may be looking at to pursue, the other companies 

may not be substantially similar to the laws that we have. 

Mrs. BONO MACK. Thank you. I think that is very important. 

And how would you explain the pattern of complaints against 

foreign businesses since the U.S. SAFE WEB Act passed? For a few 

years it declined and then just last year, which was 2011, the number jumped substantially and exceeded the number of 2006 complaints for the first time. Is the number of complaints rising generally, or are the complaints about foreign companies increasing 

disproportionately? And are complaints based on Internet fraud rising generally, foreign and domestic? That is a mouthful but—— 

Mr. STEVENSON. Well, in terms of the trends, it is, as I mentioned, somewhat challenging to really discern the exact trend 

versus the data that we have in the system, because it sometimes 

comes in—it depends on the sources. Our sources from the U.S. 

and Canada are more extensive, obviously, in contributing to the 

database, so that has some effect on what the data looks like. And 

I think we had seen a higher percentage of foreign complaints in 

2006 than we have in the last couple of years where it has remained stable and around, I think, 13 percent. 

Having said that, a number of complaints that aren’t marked as 

cross-border may indeed be cross-border because all we are reporting is what the consumer knows or thinks they know about where 

the problem is. They don’t know about those cases where maybe 

the money went somewhere else, so they don’t know about those 

cases where the web host is in another country. They don’t know 

about a lot of these instances. Or they may think that the company 

is in the United States but it is really a mail drop that then sends 

it on to some other country. So we take it as indicative in a larger 

sense of this being a substantial part of what is going on, but it 

is all woven in to the general fraud challenge of finding the bad 

guys and their money. 

Mrs. BONO MACK. All right. Thank you. 

Lastly, the Act permits the FTC to issue compulsory process for 

documents and testimony from a U.S. citizen upon request for investigative assistance by foreign governments. Has the FTC ever 

refused such a request because a foreign government’s request does 

not meet the legal burden under U.S. law? 

38 

Mr. STEVENSON. Yes, if I understood the question. We have certainly been approached by agencies who asked us about help in 

cases where their laws were not—or at least the legal provisions 

they we’re dealing with were not substantially similar. This might 

come up, for example, in the context of European privacy laws 

which are not, in a number of respects, substantially similar. 

Mrs. BONO MACK. All right. Thank you very much. 

Mr. Butterfield, would you like 5 minutes for question? 

Mr. BUTTERFIELD. Five minutes or less, thank you. 

Mrs. BONO MACK. OK. You are recognized. 

Mr. BUTTERFIELD. All right. 

Mr. Stevenson, I am informed that cross-border fraud complaints 

remain steady at about 13 percent of all fraud complaints in ’09, 

’10, and ’11. However, as a raw number, both non-cross-border and 

cross-border fraud complaints grew in each of those years. Specifically, in ’09 the fraud complaints were about 700,000. In 2010 that 

number was about 815,000. In 2011 it was pretty close to a million 

with nearly one million fraud complaints in total. Cross-border 

fraud complaints stood at about 88,000 in ’09, 104,000 in ’10, 

132,000 in ’11. With that background, the percentage of cross-border fraud complaints dropped from 2006 to 2007 and then remained steady following enactment of the WEB Act. Do you think 

that there is a relationship between enactment of that law and the 

decline and then leveling of cross-border fraud complaints as a percentage of total complaints in the last 3 years? 

Mr. STEVENSON. I would like to think so but it is difficult to see 

cause and effect there. We did have an international program before that. We certainly think that we have become more effective 

in addressing these problems. The scale though, as I mentioned, of 

the problems make it difficult to quantify the exact effect. And you 

are correct that the numbers—although the percentage in terms of 

cross-border fraud complaints has been largely flat—in absolute 

numbers we have seen, for example, this year over 100,000 U.S. 

consumers making such a complaint even with the caveat that 

there are probably more that don’t even realize they are cross-border complaints. 

Mr. BUTTERFIELD. Can you tell us whether particular types of 

frauds are driving the increase in the overall number of consumer 

complaints about fraud, both with respect to cross-border and noncross-border? 

Mr. STEVENSON. Particular types of frauds? 

Mr. BUTTERFIELD. Yes. 

Mr. STEVENSON. We certainly see and lay out in our reports the 

trends that we have seen and certain kinds of problems being more 

apparent. Robocalls, for example, I think have been an area where 

we have seen more activity. There has been probably more activity 

in the kind of grandparent imposter fraud and that kind of thing, 

people contacting someone saying, ‘‘I am out of money, you need to 

wire it to me really quickly,’’ that kind of thing. So we have seen 

various trends of that sort. 

The cases we brought in India recently involve bogus debt collection fraud where people were called and said we are going to put 

you in jail, we are going to get you fired, that kind of thing, if you 

39 

don’t pay off this couple-hundred-dollar debt that it turned out the 

consumer in fact didn’t owe to them or didn’t owe at all. 

Mr. BUTTERFIELD. Can you speak for a moment about the FTC’s 

Consumer Sentinel Database? Is that in any way related to the 

watch list that one of my colleagues raised a few moments ago? 

Mr. STEVENSON. Yes, the Consumer Sentinel Database is a database that we set up to try to combine from as many sources as possible the complaints that people were seeing. And consumers don’t 

all report to the same place, and so we want no wrong door, that 

wherever they get reported, we try to gather it together. If we just 

rely on FTC complaints, we might see them arriving 10 in a week, 

20 in a week. We combine it all together, we might see them coming in at 100 a week. We can see where there is the real problem 

as opposed to the legitimate disputes that obviously consumers 

have with businesses. And so it has been very useful for that purpose. 

We are trying to combine more and more data from other participants. We get data from the Canadian enforcement agencies, the 

complaint data. We get data through something called 

econsumer.gov that now is, I think, in eight languages of complaints involving ecommerce online that we have 20-some partner 

agencies around the world. So we are trying to collect that information. 

I hope I did not misunderstand your colleague’s message, but 

that is different from a watch list. And this is unverified, obviously. 

We want to look at it as the lead, as the starting point for our investigations, but it gives us a tremendous running start if we have 

it. 

Mr. BUTTERFIELD. Are there law enforcement agencies or governmental agencies or even other countries that you would like to 

work with to enforce the law that you are not currently working 

with? 

Mr. STEVENSON. We certainly are interested in developing further our relationships with a lot of other countries. As I mentioned, 

in some ways the relationships we have built with the Canadians 

are a model and have been very extensive. In other countries we 

have had less experience, it is a newer issue, they may have newer 

agencies, it may be not yet the higher priority for them, and so we 

are certainly doing that. And some of our technical assistance work 

in consumer protection, it also has the benefit, in addition to the 

good government—larger sense—benefits of developing our relationships with those agencies in those other countries, and to make 

them aware of this work and to make them aware of why it should 

be a high priority. 

Mr. BUTTERFIELD. Very good. Thank you. 

Mr. STEVENSON. Thank you. 

Mrs. BONO MACK. All right. Seeing no other members present, 

we are going to begin wrapping up. 

I want to again thank you very much, Mr. Stevenson, for being 

with us today. You have been very gracious for your time. I know 

I certainly appreciate what you are doing. I look forward to working with you in the future as the U.S. SAFE WEB Act moves 

through the legislative process. 

40 

I remind members that they have 10 business days to submit 

questions for the record and I would ask the witness to please respond promptly to any questions that you might receive. 

And with that, the hearing is now adjourned. 

Mr. STEVENSON. Thank you. 

[Whereupon, at 10:55 a.m., the subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

41 


82427.020

Statement of Rep. Henry A. Waxman 

Ranking Member, Committee on Energy and Commerce 

Subcommittee on Commerce, Manufacturing, and Trade Hearing ou H.R. __ , a bill to 

renew the Federal Trade Commission's authority to combat cross-border spam, spyware 

and fraud through reauthorization ofthe U.S. SAFE WEB Act of 2006 

July 12, 2012 

Thank you, Chairman Bono Mack, for holding this hearing on legislation to reauthorize 

the U.S. SAFE WEB Act of2006. 

The U.S. SAFE WEB Act granted the Federal Trade Commission new authorities to 

combat unfuir or deceptive acts or practices that are international in scope, but hann consumers 

in the United States. The Act has worked well, but it sunsets on December 22,2013 - so if we 

don't renew it, this critical authority and related investigative tools will disappear and the FTC's 

ability to fight international frauds will be impeded. 

The world is becoming more and more connected. This connectedness has created great 

opportunities for commerce and economic growth. But the spread oftelecomrnunications 

infrastructure and growing access to telephones and the Internet have also created opportunities 

for schemers and scammers operating in other nations to try to defraud U.S. consumers. Because 

of this, fighting consumer fraud requires that the FTC be able to work closely with foreign 

consumer protection agencies so that we can an protect our citizens from these schemes. The 

U.S. SAFE WEB Act granted the FTC the tools it needed to do that. 

As today's witness from the FTC, Mr. Stevenson, points out in his testimony, more than 

100 of the agency's investigations since 2007 have involved an international component, such as 

foreign targets, fureign evidence, or fureign assets. And since that time, the FTC has also filed 

more than 50 cases with an international component. In addition, due to the authorities provided 

through the U.S. SAFE WEB Act, the FTC has collected more than $ 10 IDllJion in restitution and 

has prevented U.S. consumers from losing hundreds of millions of dollars to fraudulent schemes. 

We need to reauthorize the U.S. SAFE WEB Act to maintain these authorities. 

One issue I believe needs to be explored today is the length of the reauthorization and 

whether there should be any time limit at all 

The bill we are considering today provides another 7-year reauthorization - through 

September 30,2020. The FTC recommends that there should be no sunset. All five of the FTC 

Commissioners wrote me, Ranking Member ButterfIeld, Chairman Bono Mack, and Chairman 

Upton last October urging that the sunset clause in the Act be repealed. That would make the 

authority and investigative tools permanent. In 2009, in a report to Congress required by the 

Act, all members then serving on the Commission also backed a full repeal of the sunset clause. 
42 


82427.021

I hope we can have a thoughtful and complete discussion about why a changing and 

bipartisan membership of the Commission has urged complete repeal, and the advantages and 

disadvantages to revisiting this authority again in another 7 years or some other set timeframe. 

Madam Chair, I stand ready to work with you to make sure the FTC continues to have the 

authority and investigative tools it needs to etrectively protect U.S. consumers from fraud, 

whether homegrown or from abroad. 

2 
43 


82427.022

Statement of Rep. Ed Towns (NY-tO) 

Before the US House of Representatives 

Energy and Commerce Committee 

I want to thank Chairman Bono Mack and Ranking Member Butterfield 

for holding this hearing today to examine the U.S. SAFE WEB Act of 

2006. Combating Internet scams and fraud against U.S. citizens by 

individuals abroad should be a top priority ofthis subcommittee. 

According to the FTC, in 2005 almost 1/5 of all consumer complaints 

that were received by the FTC involved fraud that originated outside the 

United States. Prior to the enactment of the SAFE WEB Act in 2006 

consumers suffered huge losses to foreign companies of almost $219 

million. 

Unfortunately the FTC was limited in its authority to act against these 

foreign operators because they could not share information with foreign 

law enforcers. Upon listening to the recommendations from officials at 

the FTC, Congress enacted the SAFE WEB Act. The sharing of 
44 

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82427.023

information is key in law enforcement, and victims of malicious acts by 

foreign operators want to know that their government is doing all it can 

to protect them. 

The legislation before this committee reauthorizes the provisions in the 

SAFE WEB Act for an additional 7 years and allows the continued 

sharing of information with law enforcement officials. I strongly support 

this legislation and I'm looking forward to hearing from our witness 

today on how the provisions in this act are working to protect and secure 

the American people from fraud. This Congress must do all it can to 

ensure that the various streams of commerce in our society are safe and 

secure from foreign criminals intent on causing harm to our citizens. 

Thank you Madam Chairman, I yield back the balance of my time.