[Federal Register Volume 77, Number 191 (Tuesday, October 2, 2012)]
[Notices]
[Pages 60119-60123]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-24177]
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FEDERAL TRADE COMMISSION
[File No. 112 3151]
Proposed Consent Agreements: DesignerWare, LLC, Timothy Kelly and
Ronald P. Koller, Aspen Way Enterprises, Inc., Watershed Development
Corp., et al.; Analysis of Proposed Consent Orders To Aid Public
Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed consent agreements.
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Overview Information: DesignerWare, LLC; Timothy Kelly and Ronald
P. Koller; Aspen Way Enterprises, Inc.; Watershed Development Corp.,
also doing business as Watershed and Aaron's Sales and Lease Ownership;
Showplace, Inc., also doing business as Showplace Rent-to-Own and
Showplace Lease/Purchase; J.A.G. Rents, LLC, also doing business as
ColorTyme; Red Zone Investment Group, Inc., also doing business as
ColorTyme; B. Stamper Enterprises, Inc., also doing business as Premier
Rental Purchase; and C.A.L.M. Ventures, Inc., also doing business as
Premier Rental Purchase; Analysis of Proposed Consent Orders to Aid
Public Comment.
SUMMARY: The consent agreements in these matters settle alleged
violations of federal law prohibiting unfair or deceptive acts or
practices or unfair methods of competition. The attached Analysis to
Aid Public Comment describes both the allegations in the draft
complaints and the terms of the consent orders--embodied in the consent
agreements--that would settle these allegations.
DATES: Comments must be received on or before October 25, 2012.
[[Page 60120]]
ADDRESSES: Interested parties may file a comment online or on paper, by
following the instructions in the Request for Comment part of the
SUPPLEMENTARY INFORMATION section below. Write ``DesignerWare, LLC'';
``Timothy Kelly and Ronald P. Koller''; ``Aspen Way Enterprises,
Inc.''; ``Watershed Development Corp.''; ``Showplace, Inc.''; ``J.A.G.
Rents, LLC''; ``Red Zone, Inc.''; ``B. Stamper Enterprises, Inc.''; or
``C.A.L.M. Ventures, Inc.'', and ``File No. 112 3151'' on your comment,
and file your comment online on one of the following web-based forms:
https://ftcpublic.commentworks.com/ftc/designwareconsent; https://ftcpublic.commentworks.com/ftc/kellyandkollerconsent; https://ftcpublic.commentworks.com/ftc/aspenwayenterprisesconsent; https://ftcpublic.commentworks.com/ftc/watersheddevelopmentconsent; https://ftcpublic.commentworks.com/ftc/showplaceincconsent; https://ftcpublic.commentworks.com/ftc/jagrentsconsent; https://ftcpublic.commentworks.com/ftc/redzoneinvestmentconsent; https://ftcpublic.commentworks.com/ftc/bstamperenterprisesconsent; or https://ftcpublic.commentworks.com/ftc/calmventuresconsent, by following the
instructions on the web-based form. If you prefer to file your comment
on paper, mail or deliver your comment to the following address:
Federal Trade Commission, Office of the Secretary, Room H-113 (Annex
D), 600 Pennsylvania Avenue NW., Washington, DC 20580.
FOR FURTHER INFORMATION CONTACT: Tracy Thorleifson (206-220-4481) or
Julie Mayer (206-220-4475), FTC, Northwest Region, 600 Pennsylvania
Avenue NW., Washington, DC 20580.
SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Sec. 2.34 the
Commission Rules of Practice, 16 CFR 2.34, notice is hereby given that
the above-captioned consent agreements containing consent orders to
cease and desist, having been filed with and accepted, subject to final
approval, by the Commission, have been placed on the public record for
a period of thirty (30) days. The following Analysis to Aid Public
Comment describes the terms of the consent agreements, and the
allegations in the complaints. An electronic copy of the full text of
each consent agreement package can be obtained from the FTC Home Page
(for September 25, 2012), on the World Wide Web, at http://www.ftc.gov/os/actions.shtm. A paper copy can be obtained from the FTC Public
Reference Room, Room 130-H, 600 Pennsylvania Avenue NW., Washington, DC
20580, either in person or by calling (202) 326-2222.
You can file a comment online or on paper. For the Commission to
consider your comment, we must receive it on or before October 25,
2012. Write ``DesignerWare, LLC''; ``Timothy Kelly and Ronald P.
Koller''; ``Aspen Way Enterprises, Inc.''; ``Watershed Development
Corp.''; ``Showplace, Inc.''; ``J.A.G. Rents, LLC''; ``Red Zone,
Inc.''; ``B. Stamper Enterprises, Inc.''; or ``C.A.L.M. Ventures,
Inc.'' and ``File No. 112 3151'' on your comment. Your comment--
including your name and your state--will be placed on the public record
of this proceeding, including, to the extent practicable, on the public
Commission Web site, at http://www.ftc.gov/os/publiccomments.shtm. As a
matter of discretion, the Commission tries to remove individuals' home
contact information from comments before placing them on the Commission
Web site.
Because your comment will be made public, you are solely
responsible for making sure that your comment does not include any
sensitive personal information, like anyone's Social Security number,
date of birth, driver's license number or other state identification
number or foreign country equivalent, passport number, financial
account number, or credit or debit card number. You are also solely
responsible for making sure that your comment does not include any
sensitive health information, like medical records or other
individually identifiable health information. In addition, do not
include any ``[t]rade secret or any commercial or financial information
which is * * * privileged or confidential,'' as discussed in Section
6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 16 CFR
4.10(a)(2). In particular, do not include competitively sensitive
information such as costs, sales statistics, inventories, formulas,
patterns, devices, manufacturing processes, or customer names.
If you want the Commission to give your comment confidential
treatment, you must file it in paper form, with a request for
confidential treatment, and you have to follow the procedure explained
in FTC Rule 4.9(c), 16 CFR 4.9(c).\1\ Your comment will be kept
confidential only if the FTC General Counsel, in his discretion, grants
your request in accordance with the law and the public interest.
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\1\ In particular, the written request for confidential
treatment that accompanies the comment must include the factual and
legal basis for the request, and must identify the specific portions
of the comment to be withheld from the public record. See FTC Rule
4.9(c), 16 CFR 4.9(c).
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Postal mail addressed to the Commission is subject to delay due to
heightened security screening. As a result, we encourage you to submit
your comments online. To make sure that the Commission considers your
online comment, you must file it on one of the following web-based
forms: https://ftcpublic.commentworks.com/ftc/designwareconsent;
https://ftcpublic.commentworks.com/ftc/kellyandkollerconsent; https://ftcpublic.commentworks.com/ftc/aspenwayenterprisesconsent; https://ftcpublic.commentworks.com/ftc/watersheddevelopmentconsent; https://ftcpublic.commentworks.com/ftc/showplaceincconsent; https://ftcpublic.commentworks.com/ftc/jagrentsconsent; https://ftcpublic.commentworks.com/ftc/redzoneinvestmentconsent; https://ftcpublic.commentworks.com/ftc/bstamperenterprisesconsent; or https://ftcpublic.commentworks.com/ftc/calmventuresconsent, by following the
instructions on the web-based form. If this Notice appears at http://www.regulations.gov/#!home, you also may file a comment through that
Web site.
If you file your comment on paper, write ``DesignerWare, LLC'';
``Timothy Kelly and Ronald P. Koller''; ``Aspen Way Enterprises,
Inc.''; ``Watershed Development Corp.''; ``Showplace, Inc.''; ``J.A.G.
Rents, LLC''; ``Red Zone, Inc.''; ``B. Stamper Enterprises, Inc.''; or
``C.A.L.M. Ventures, Inc.'' and ``File No. 112 3151'' on your comment
and on the envelope, and mail or deliver it to the following address:
Federal Trade Commission, Office of the Secretary, Room H-113 (Annex
D), 600 Pennsylvania Avenue NW., Washington, DC 20580. If possible,
submit your paper comment to the Commission by courier or overnight
service.
Visit the Commission Web site at http://www.ftc.gov to read this
Notice and the news release describing it. The FTC Act and other laws
that the Commission administers permit the collection of public
comments to consider and use in this proceeding as appropriate. The
Commission will consider all timely and responsive public comments that
it receives on or before October 25, 2012. You can find more
information, including routine uses permitted by the Privacy Act, in
the Commission's privacy policy, at http://www.ftc.gov/ftc/privacy.htm.
[[Page 60121]]
Analysis of Agreement Containing Consent Order To Aid Public Comment
The Federal Trade Commission (``Commission'' or ``FTC'') has
accepted, subject to final approval, consent agreements from the
following respondents: DesignerWare, LLC; Timothy Kelly, and Ronald P.
Koller, individually and as officers of DesignerWare, LLC; Aspen Way
Enterprises, Inc.; Watershed Development Corp.; Showplace, Inc., d/b/a
Showplace Rent-to-Own; J.A.G. Rents, LLC, d/b/a ColorTyme; Red Zone,
Inc., d/b/a ColorTyme; B. Stamper Enterprises, Inc., d/b/a Premier
Rental Purchase; and C.A.L.M. Ventures, Inc., d/b/a Premier Rental
Purchase.
The proposed consent orders have been placed on the public record
for thirty (30) days for receipt of comments by interested persons.
Comments received during this period will become part of the public
record. After thirty (30) days, the Commission will again review the
agreements and the comments received, and will decide whether it should
withdraw from any of the agreements and take appropriate action or make
final the agreements' proposed orders.
Timothy Kelly and Ronald Koller founded and co-owned DesignerWare,
LLC, a small software company that designed and licenses a single
product, PC Rental Agent. Mr. Koller ended his association with
DesignerWare in March 2012. PC Rental Agent is exclusively marketed to
rent-to-own (``RTO'') stores. RTO stores rent to consumers a variety of
household items, including personal computers. PC Rental Agent is
designed to assist RTO stores in tracking and recovering rented
computers. Its chief function is a ``kill switch,'' a program that can
be used by a store to render a computer inoperable if the consumer
renter is late or defaults on payments or if the computer is stolen. PC
Rental Agent also offers a wiping feature that permits RTO stores to
quickly erase the hard drives of computers prior to re-renting them to
consumers.
Through PC Rental Agent, which RTO store licensees installed on
rented computers, DesignerWare also provided access to ``Detective
Mode.'' Detective Mode was a software application embedded in the PC
Rental Agent program. At the request of an RTO store, DesignerWare
would remotely complete the Detective Mode installation process on an
individual computer and activate ``the Detective.'' Detective Mode
would surreptitiously log the computer user's keystrokes, capture
screenshots, and take pictures with the computer's webcam and send the
data to DesignerWare's servers. Neither DesignerWare nor the RTO stores
who have used Detective Mode disclosed to computer users that they were
being monitored in this manner. Although DesignerWare recommended that
Detective Mode be installed and activated only to locate and identify
the person in possession of a lost or stolen computer, DesignerWare did
not monitor its own collection of or limit RTO stores' access to
Detective Mode information to ensure that the information was obtained
and used only for designated purposes.
DesignerWare sent the information captured by Detective Mode to an
email account designated by each RTO store. Although DesignerWare's
employees did not themselves view Detective Mode data, without
DesignerWare licensing PC Rental Agent and making Detective Mode
available to the RTO stores, as well as providing them with access to
its web portal and providing servers to support both PC Rental Agent
and Detective Mode, this collection and disclosure of consumers'
private information would not be possible.
RTO stores also used Detective Mode to send fake ``software
registration'' forms to consumers to deceive them into providing their
contact and location information. DesignerWare created several
different fake registration forms that its servers displayed on
consumers' computers. An RTO store could use this feature of Detective
Mode by requesting that DesignerWare activate it. No actual software
was registered as a result of a consumer providing the requested
information. Rather, Detective Mode captured the information entered in
the prompt boxes and sent it to DesignerWare, who then emailed the data
to the RTO store, all unbeknownst to the consumer. DesignerWare
discontinued use of Detective Mode in January 2012.
In September 2011, DesignerWare added another feature to PC Rental
Agent: the capacity to track the physical location of rented computers
via WiFi hotspot locations. The information derived from WiFi hotspot
contacts can frequently pinpoint a computer's location to a single
building and, when aggregated, can track the movements and patterns of
individual computer users over time. DesignerWare makes this
information easily available to the RTO stores by cross-referencing a
list of publicly available WiFi hotspots with the street addresses for
the particular hotspots viewed or accessed by rented computers.
DesignerWare applied its location tracking upgrade of PC Rental Agent
to every computer on which PC Rental Agent was installed, without
obtaining consent from, or providing notice to, the computers' renters.
DesignerWare recommends that RTO stores only use this tracking data in
connection with recovering stolen property, but it does not monitor or
limit the RTO stores' access to such location information.
Aspen Way Enterprises, Watershed Development, Showplace, J.A.G.
Rents, Red Zone, B. Stamper Enterprises, and C.A.L.M. Ventures are RTO
stores that have licensed PC Rental Agent from DesignerWare. These RTO
stores have used information transmitted by DesignerWare when
attempting to collect from computer renters who are late in paying or
have otherwise breached their rental contracts. Using Detective Mode,
these RTO stores have received from DesignerWare webcam photos of
computer users (and anyone else within view of the camera), computer
users' keystrokes, and screenshots of their computer activities. This
information has revealed private and confidential details about
computer users, such as their passwords for access to email accounts,
social media Web sites, and financial institutions. Other confidential
information was also captured, including medical records, private
emails to doctors, employment applications containing Social Security
numbers, bank and credit card statements, and discussions of defense
strategies in a pending lawsuit. Through Detective Mode, DesignerWare
and the RTO stores also secretly photographed the private conduct of
consumers in their homes. This included pictures of children, household
visitors, individuals not fully clothed, and couples engaged in
intimate activities.
The collection and disclosure of such private and confidential
information about consumers causes or is likely to cause substantial
injury to consumers. Consumers are likely to be substantially injured
by the exposure to strangers of personal, financial account access, and
medical information. Consumers are actually harmed by DesignerWare's
unwarranted invasion into their homes and lives and its capture and
disclosure of the private details of individual and family life,
including, for example, images of visitors, children, family
interactions, partially undressed individuals, and couples engaged in
sexual activities. Sharing data like that collected by Detective Mode
with third parties can cause consumers financial and physical injury,
and impair their peaceful enjoyment of their homes. Because Detective
Mode functions secretly, consumers cannot reasonably avoid this harm,
which is neither trivial nor speculative. Moreover, there are no
[[Page 60122]]
countervailing benefits to consumers or competition for continued use
of Detective Mode in this context, where RTO stores have effective
alternative methods for collections.
DesignerWare also sent consumers' contact information to the RTO
stores. DesignerWare gathered this information from computer users who
completed the deceptive ``software registration'' forms sent through
Detective Mode. The RTO stores used this information to find, require
payment for, or repossess a rented computer.
The Commission's complaint against DesignerWare, Kelly, and Koller
(collectively, ``DesignerWare Respondents'') alleges that the company
and its principals engaged in unfair and deceptive conduct and provided
the means and instrumentalities to engage in unfairness, all in
violation of Section 5 of the Federal Trade Commission Act, 15 U.S.C.
45. The first count of the complaint focuses on actions taken by
DesignerWare that caused or were likely to cause substantial injury to
consumers. Count I alleges that the DesignerWare Respondents engaged in
unfair conduct by installing monitoring software on rented computers,
gathering personal, financial, and health information about consumers
from computers, and disclosing that information to RTO store licensees.
Count I also alleges as unfair the DesignerWare Respondents'
installation of geophysical location tracking software on rented
computers without consent from the computer renters, the tracking of
computers' geophysical locations without notice to computer users, and
the disclosure of that information to the RTO stores.
Count II alleges that the DesignerWare Respondents provided the
means to third parties--the RTO stores--to violate Section 5. The first
part of the count charges the DesignerWare Respondents with providing
RTO stores with the means and instrumentalities to engage in unfairness
by furnishing them with software that could monitor consumers by
recording their keystrokes, capturing screenshots of information
displayed on a computer, and taking pictures of the computer user, and
further could track the geophysical location data of rented computers
without the consent of the computer renter or notice to the computer
user. The second part of Count II alleges that the DesignerWare
Respondents provided the means and instrumentalities to RTO stores to
engage in unfair collection practices by providing them with the data
gathered via PC Rental Agent and Detective Mode. Count II focuses on
actions taken by DesignerWare that were integral to the harm to
consumers caused or likely to be caused by the RTO stores. Here,
without PC Rental Agent and Detective Mode and without access to
DesignerWare's servers to execute their commands to rented computers,
collect consumers' confidential information and transmit it to them,
the RTO stores could not unfairly monitor their computer renters or use
improperly gathered information in connection with collections.
Count III of the complaint charges the DesignerWare Respondents
with deceptively gathering--and disclosing--consumers' personal
information collected from the fake software registration forms that
Detective Mode caused to appear on consumers' rented computers.
Each of the Commission's complaints against the seven RTO stores
contains substantially similar allegations regarding the stores'
violations of the FTC Act. The complaints charge that the RTO stores
unfairly gathered consumers' personal information by installing
monitoring software on rented computers and engaged in unfair
collection practices by using the improperly gathered information to
collect on consumer rental contracts. The complaints further allege
that the RTO stores deceptively gathered consumers' personal
information by activating the Detective Mode feature that sends the
fake software registration forms to consumers' rented computers.
The proposed orders contain strong injunctive relief designed to
remedy the unlawful conduct by DesignerWare, its principals, and the
RTO stores. The orders define ``monitoring technology and geophysical
location tracking technology'' so that the technological applications
covered by the order are clearly described. ``Monitoring technology''
means any hardware, software, or application utilized in conjunction
with a computer that can cause the computer to (1) capture, monitor, or
record, and (2) report information about user activities by recording
keystrokes, clicks, or other user-generated actions; capturing
screenshots of the information displayed on a computer monitor or
screen; or activating the camera or microphone function of a computer
to take photographs or record audio or visual content through the
computer's webcam or microphone. The definition of ``geophysical
location tracking'' includes the reporting of GPS coordinates, WiFi
hotspots, or telecommunications towers--all technologies that allow for
a relatively precise location of the item tracked. In addition, a
``covered rent-to-own transaction'' is defined as one in which a
consumer agrees to purchase or rent a computer, where the rental
agreement provides for payments over time and an option to purchase the
computer.
The proposed orders with DesignerWare and its principals, Kelly and
Koller, are separate, but contain identical injunctive provisions.
Section I of the proposed orders with DesignerWare and its principals
bans them from using--as well as licensing, selling, or otherwise
providing third parties with--monitoring technology in connection with
any covered RTO transaction. Section II prohibits them from using
geophysical location tracking technology to gather information from any
computer without providing clear and prominent notice to and obtaining
affirmative express consent from the computer's renter at the time the
computer is rented. This section also requires clear and prominent
notice to computer users immediately prior to each time tracking
technology is activated. In addition, Section II mandates that
DesignerWare and its principals require their licensees to obtain
consent and provide notice prior to initiating any location tracking.
However, DesignerWare and its principals do not need to provide notice
to a computer user prior to activating geophysical location tracking
technology if (1) there is a reasonable basis to believe that the
computer has been stolen and (2) a police report has been filed.
Section III of the proposed orders with DesignerWare and its
principals prohibits the deceptive collection of consumer information
via fake software registration notices. Section IV requires that any
data that was collected through any monitoring or tracking software
without the requisite notice and consent be destroyed and that any
properly collected data be encrypted when transmitted. Section V bars
DesignerWare and its principals from making misrepresentations about
the privacy or security of any personal information gathered from or
about consumers.
Sections VI through IX of both orders contain reporting and
compliance provisions. Section VI of the proposed DesignerWare order
requires the company to disseminate the order now and in the future to
all current and future principals, officers, directors, and managers,
and to persons with responsibilities relating to the subject matter of
the order. This section also requires DesignerWare to secure a signed
and dated statement acknowledging receipt of the order from
[[Page 60123]]
all persons who receive a copy. Section VII requires DesignerWare to
submit compliance reports to the Commission within sixty (60) days, and
periodically thereafter as requested. It also requires the company to
notify the Commission of changes in DesignerWare's corporate status.
Section VI of the proposed order with the DesignerWare principals
requires respondents to distribute it to all current and future
principals, officers, directors, and managers of any company that
either respondent controls that engages in any covered RTO transaction
as well as to all current and future employees, agents, and
representatives having responsibilities relating to the subject matter
of this order. It also requires the respondents to secure a signed and
dated statement acknowledging receipt of the order from all persons who
receive a copy. Section VII of the proposed order with the DesignerWare
principals requires them to submit compliance reports to the Commission
within sixty (60) days, and periodically thereafter as requested. In
addition, this section requires them to notify the Commission of
changes in their business or employment for three (3) years.
Under Section VIII of the proposed orders with both DesignerWare
and its principals, respondents must retain documents relating to their
compliance with the order for a five (5) year period. Finally, Section
IX of both proposed orders is a provision ``sunsetting'' the orders
after twenty (20) years, with certain exceptions.
The proposed orders against the RTO stores (which are identical to
each other) contain similar injunctive provisions to those in the
proposed orders with DesignerWare and its principals. Section I of each
of the proposed orders bans the RTO stores from using monitoring
technology in connection with any covered RTO transaction. Section II
prohibits the stores from using geophysical location tracking
technology to gather information from any computer without providing
clear and prominent notice to the computer's renter and obtaining
affirmative express consent from the computer's renter at the time the
computer is rented. This section also requires clear and prominent
notice to a computer user immediately prior to each time such
technology is activated. The proposed RTO store orders also suspend the
notice requirement if (1) there is a reasonable basis to believe that
the computer has been stolen and (2) a police report has been filed.
Section III of each of the proposed orders prohibits the deceptive
collection of consumer information via fake software registration
notices.
Section IV bars the stores from collecting or attempting to collect
a debt, money, or property pursuant to a consumer rental contract by
using any information or data that was improperly obtained from a
computer by monitoring technology. Section V requires that any data
collected through any monitoring or tracking software without the
requisite notice and consent be destroyed, and that any properly
collected data be encrypted when transmitted. As fencing in, Section VI
bars misrepresentations about the privacy or security of any personal
information gathered from or about consumers.
Sections VII through X of the proposed RTO store orders contain
reporting and compliance provisions. Section VII requires distribution
of the order now and in the future to all current and future
principals, officers, directors, and managers, and to persons with
responsibilities relating to the subject matter of the order. It also
requires the RTO stores to secure signed and dated statements
acknowledging receipt of the order from all persons who receive a copy
of the order. Section VIII requires the RTO stores to submit compliance
reports to the Commission within sixty (60) days, and periodically
thereafter as requested, and ensures notification to the Commission of
changes in corporate status. Under Section IX, the RTO stores must
retain documents relating to order compliance for a five (5) year
period. Finally, Section X is a provision ``sunsetting'' the order
after twenty (20) years, with certain exceptions.
The purpose of this analysis is to facilitate public comment on the
proposed orders. It is not intended to constitute an official
interpretation of the proposed complaints or orders or to modify the
terms of the orders in any way.
By direction of the Commission, Commissioner Rosch abstaining.
Donald S. Clark,
Secretary.
[FR Doc. 2012-24177 Filed 10-1-12; 8:45 am]
BILLING CODE 6750-01-P