[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