E-Commerce Law Week, Issue 413

FBI Circulates Draft "Super-CALEA" Bill That Would Make Even J. Edgar Hoover Blush
At a meeting with industry representatives on July 7, the FBI circulated a draft of a supercharged version of the Communications Assistance for Law Enforcement Act (CALEA), the law that requires telecommunications carriers to build wiretap capabilities into their networks to facilitate electronic surveillance by law enforcement. CALEA has recently been the subject of regulatory action at the Federal Communications Commission and the D.C. Circuit, resulting in an expansive reading of the existing law to cover broadband Internet access providers and interconnected Voice over Internet Protocol providers. Not content with its victories in these fora, the FBI apparently is requesting expansive changes to CALEA. One look at the Bureau's "Super-CALEA" reveals that it is a pure law enforcement "wish list," with little or no attempt to balance competing interests as the current statute does. Indeed, the section-by-section analysis that accompanies the draft bill specifically explains that the purpose of one of the amendments is to demote privacy interests in favor of the carrier's "primary duty to facilitate access to all of the communications or communication-identifying information that a law enforcement agency has been authorized to obtain." What's more, the draft bill, if passed, would constitute a radical expansion of the FBI's access to (and control of foreign agencies' access to) purely foreign communications.

EC Hits Microsoft with $357 Million Fine in Antitrust Case
After consulting with competition regulators, the European Commission announced on July 12 that it will fine Microsoft €1.5 million per day for the period from 16 December 2005 to 20 June 2006, for a total penalty payment of €280.5 million, or approximately $357 million. European regulators had voted unanimously on June 20 to back the EC's plan to fine Microsoft for not fully implementing the Commission's 2004 ruling against the company, which required the company to disclose complete and accurate interface information which would allow rival vendors to interoperate with Windows. The Commission also warned that, should Microsoft's non-compliance continue, the company could incur fines of up to €3 million per day from July 31, 2006. While high, this figure is still less than the full amount that the EC could charge, which is equal to 5% of the average daily turnover in the preceding business year, per day -- in Microsoft's case, $4.28 million a day. Microsoft has said that it plans to appeal.

Yahoo! Settles Click Fraud Class Action
Search engines' pay-per-click advertising format has quickly become one of the most lucrative forms of advertising on the web, accounting for 41% of online advertising revenue in 2005. But along with record earnings, it has also brought new liabilities. Concerned that "click fraud" is causing them to pay for useless traffic, several online advertisers have brought class actions against Yahoo!, Google, and other search engines. In March, Google settled a suit that had been brought in Arkansas state court, while denying any wrongdoing. Yahoo! reached a settlement in a separate class action brought in the Central District of California, which received preliminary approval on June 28. The terms of the proposed settlement have not yet been made public, but Yahoo reportedly agreed to pay $4.95 million in attorneys' fees.  In addition, Yahoo! has stated that "clicks dating back through January 2004" will be eligible for a "100% credit, which can be used however the advertiser wishes," if Yahoo!'s "investigation determines that a credit is due." Like Google, Yahoo! has denied any wrongdoing or legal liability. Thus the question of what -- if any -- liability internet companies should have for invalid clicks remains undecided.

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