Letter from James A. Kohm, Associate Director, Division of Enforcement, Bureau of Consumer Protection

Bureau of Consumer Protection
Division of Enforcement
UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
WASHINGTON, D.C. 20580
November 17,2011
Via Email and Overnight Mail
L. Jean Noonan
Hudson Cook, LLP
1020 19th Street, N. W., 7th Floor
Washington, DC 20036
Dear Ms. Noonan,
This staff advisory opinion responds to your August 19,2011, letter seeking an
informal staff opinion regarding the application of the Restore Online Shoppers'
Confidence Act ("ROSCA"), 15 USC § 840 I, et. seq., to the proposed online husiness
practices of your client, the National Railroad Passenger Corporation (Amtrak). The
views expressed in this letter are those of the staff assigned to enforce ROSCA. In
accordance with Section 1.3(c) of the Commission's Rules of Practice and Procedure, 16
C.F.R. § 1.3(c), this is a staff opinion only and has not been reviewed or approved by the
Commission or by an individual Commissioner. It is not binding upon the Commission
and is given without prejudice to the right of the Commission later to rescind the advice
ana, when appropriate, to commence an enforcement proceeding. In conformance with
Section 1.4 of the Commission's Rules of Practice, 16 C.F.R. § 1.4, this letter and
Amtrak's request, are being placed on the public record. The opinions expressed in this
letter are based on the factual scenario you described in your letter.
As described in your letter, Amtrak allows its customers to purchase train tickets
on its website. Prior to the enactment of ROSCA, Amtrak also offered travel-related
products and services from trusted third party partners. When ROSCA went into effect,
Amtrak ceased offering consumers the opportunity to purchase third party products and
services on Amtrak's website. The central issue raised in your letter is whether Amtrak's
prior practice of offering third party products and services, with certain modifications,
would violate ROSCA. As described below, we conclude that under the specific factual
scenario presented in your letter, staff would not recommend an enforcement action
against Amtrak for violations ofROSCA.

Ms. Jean Noonan
Hudson Cook, LLP
November l7,2011-Page2
ROSCA PROVISIONS
Section 3(b) ofROSCA provides that "[i]t shall be unlawful for an initial
merchant to disclose a credit card, debit card, bank account, or other financial account
number, or to disclose other billing information that is used to charge a customer of the
initial merchant, to any post-transaction third party seller for use in an Internet-based sale
of any goods or services from that post-transaction third party seller." ROSCA § 3(d)(I)
defines initial merchant as "a person that has obtained a consumer's billing information
directly from the consumer through an Internet transaction initiated by the consumer." A
post-transaction third party seller is "a person that (A) sells, or offers for sale, any good
or service on the Internet; (B) solicits the purchase of such goods or services on the
Internet through an initial merchant after the consumer has initiated a transaction with the
initial merchant; and (C) is not (i) the initial merchant; (ii) a subsidiary or corporate
affiliate of the initial merchant; or (iii) a successor of an entity described in clause (i) or
(ii)." ROSCA § 3(d)(2).
DISCUSSION
According to your letter, when a consumer seeks to purchase a train ticket on
Amtrak's website, the consumer must enter itinerary details, including the city to which
the consumer seeks to travel, the class of service desired, and the date(s) and time(s) of
travel. The consumer is then provided with ticket options. Once a ticket is selected, the
consumer must add the ticket to a "cart" that is clearly displayed on the side of the
consumer's computer screen as an itinerary. Prior to ROSCA, Amtrak would next offer
consumers travel-related products such as rental cars, hotels, and activities provided by
third party partners. The consumer could then decide whether to add third party products
to their Amtrak shopping cart. The consumer could also proceed with the booking
process without reviewing any other products by clicking the "Enter Passenger
Information" box located above the third party products. Only after the consumer
finished shopping for tickets and other travel-related products and services, was the
consumer sent to a passenger information page that asked the consumer to log in to
Amtrak's website or enter passenger contact information. The consumer was then
directed to a payment information page where they could enter financial account
information and finalize the purchase. Finally, consumers were sent to a purchase
confirmation page. Amtrak ultimately passed consumers' financial data to the third party
partners from whom a product or service was purchased.
For ROSCA to apply in these circumstances, Amtrak must be an "initial
merchant" under Section 3(d)(l) and Amtrak's third party partners must be "post-
transaction third party seller[s]" under Section 3(d)(2). 	Because Amtrak obtains billing
information directly from customers that initiate an Internet transaction on its website, it
is an initial merchant. ROSCA § 3(d)(I). If Amtrak's proposed third party partners meet
the three criteria set forth in Sections 3(d)(2)(A)-(C), they would be "post-transaction
third party seller[s]." Per your letter they clearly meet two of the criteria: the third party

Ms. Jean Noonan
Hudson Cook, LLP
November 17, 2011 - Page 3
partners sell goods or services over the Internet, Section 3(d)(2)(A), and are not the initial
merchant, Section § 3(d)(2)(C).
Therefore, the key issue is whether Amtrak's third party partners would solicit the
purchase of goods or services after consumers have initiated a transaction with Amtrak
under Section 3(d)(2)(B). ROSCA does not define "initiate a transaction" and no courts
have addressed this issue. One interpretation of Section 3 is that a transaction is initiated
after a consumer proceeds to a website's checkout page. Under this interpretation,
ROSCA would not apply because the solicitation for third party products occurs before
consumers go to Amtrak's checkout or payment submission page. Another interpretation
is that a transaction is initiated when a consumer places products or services in a
website's shopping cart. Under this interpretation, Amtrak's third party partners would
be "post-transaction third party seller[s]" and ROSCA would apply.
Even if the second interpretation is correct, staff would not recommend an
enforcement action because the business practices you describe are unlikely to result in
consumer confusion or injury and, therefore, staff would not recommend an enforcement
action. There are four aspects of Amtrak's proposed marketing that should prevent any
consumer injury were Amtrak to resume offering third party products and services by
way ofthe clear and conspicuous marketing described in your letter.
First, consumers will be required to affirmatively select and add desired third
party products and services to their shopping cart. In stark contrast to the aggressive,
misleading tactics described in ROSCA § 2 (4) that caused consumers to be charged for
products that they do not want, Amtrak's proposed practices enable consumers to select
only the specific products and services they want. Likewise, Amtrak's proposed
practices are designed to make consumers aware of what they are purchasing. Contra
ROSCA § 2 (6) (millions of consumers were unaware that they had been enrolled in
membership clubs).
Second, when offering third party products, Amtrak will prominently display the
names and logos of its third party partners, including rental car companies and hotels.
Such clear and conspicuous disclosures make it unlikely that consumers will erroneously
conclude that products are being offered by Amtrak itself or that the third party partners
are affiliated with Amtrak. Contra ROSCA § 2 (4) and (5).
Third, Amtrak will clearly and conspicuously disclose the total cost of each third
party product. Thus, consumers will know exactly what products or services they are
purchasing as well as how much they will be charged and by whom. Because Amtrak's
proposed business practices do not obfuscate the existence or financial obligations ofthe
third party transactions, the concerns identified in ROSCA §§ 2 (5) and (7) (that offers
were designed to make consumers think they were part of the initial purchase, rather than
a new transaction with a new seller, and that consumers do not expect to be charged when
they have not submitted their billing information) are minimized.

Ms. Jean Noonan
Hudson Cook, LLP
November 17, 2011 - Page 4
Finally, Amtrak will constantly display a shopping cart, which details the
consumer's entire itinerary and itemizes both train tickets and ancillary products. The
website will allow consumers to remove ancillary products from the shopping cart
through a simple one-click mechanism, enabling consumers to reconsider whether to do
business with Amtrak's third party partners before completing the initial transaction. In
contrast to the findings ofROSCA § 2 (8), Amtrak provides consumers with multiple
opportunities to reject the third party transactions.
As discussed above, Amtrak's proposed marketing does not rely on the
problematic marketing tactics addressed in the ROSCA findings. 	Moreover, Amtrak's
intended marketing will enable consumers to make informed purchasing decisions and
minimize the risk of consumer harm. Accordingly, given your factual description of
Amtrak's proposed marketing, we would not recommend an enforcement action under
ROSCA.
IJ
Associate Director
Division of Enforcement