OFFICE DEPOT AND BREACH OF THE PUBLIC TRUST

A scam requires victims who trust in the basic honesty of others. The more trustworthy the perpetrator appears, the larger is the pool of potential victims.

Following are the unbelievably contemptible facts alleged in the Federal Trade Commission (FTC) Complaint filed against the Office Depot and Support.com on March 27, 2019. Settlements were executed on March 29, 2019, whereby Office Depot agreed to pay $25 million and Support.com  $10 million to settle the allegations. Per the settlement terms, neither party admits nor denies the allegations.

scam
FTC Allegations:

In 2007, Office Depot began offering consumers a free service using Support.com’s “PC Health Check Program” to scan and diagnose consumers’ computers in order to identify security problems and performance issues. Depending upon the report produced after a scan, Office Depot may offer to sell to a consumer diagnostic and repair services. So far sounds like a nice and legitimate business model.

There was just one hitch, as alleged in the FTC Complaint, the PC Health Check Program actually had no functionality to scan and identify problems. Well then, how did the program produce a report?

An Office Depot employee would install and run the PC Health Check Program on a consumer’s computer. Prior to the scan, the program would prompt the employee to ask the consumer about the presence of the following issues: (i) “Frequent pop-ups or other problems prevent me from browsing the internet,” (ii) “My PC recently became much slower or is too slow to use,” (iii) “I am often warned of a virus infection or I am asked to pay for virus removal,” and (iv) “My PC frequently crashes.” Support.com programed the software so that if an Office Depot employee checked one of four boxes relating to these issues, then the PC Health Check Program automatically created a report showing the presence of malware or infections on the consumer’s computer, consistent with the boxes checked. So, there was no actual scan (though there certainly was a scam). The result was pre-ordained by the boxes checked. The consumers were not informed that the report was generated based upon the consumer’s comments. Now, how does that sound as a business model???

Based upon these deceptive reports, consumers could be sold diagnostic and repair services costing more than $300 per service which were branded as Office Depot services, but actually provided by Support.com remotely, and the proceeds were divided between the companies.

This scam operated from 2007 until 2016. Both companies were very aware of how this “software” operated. It was actually considered a “sales tool.” That’s a nice euphemism for the scam. Office Depot advertised this service as a “Free PC Tune-up” to lure the consumers into the stores and claimed that the free scanning service was valued at up to $60. There were some later versions of the program that performed some limited optimizations, like removing junk files and reconfiguring certain settings.  

The outrageous bottom line was that the problem report was unrelated to the scan. A clean scan would not change the report if the boxes were checked. The goal was at least a 50% conversion rate for consumers to order the Office Depot support services. Employees were well-trained on how to effectively use this unique “sales tool.”

So how was the scam uncovered? In 2016, a Seattle television station was alerted (probably by a disgruntled employee) to the situation. The station brought new out of the box computers to be scanned by the program. The results spoke for themselves.

The Law:

Well, the law is clear. Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), prohibits “unfair or deceptive acts or practices in or affecting commerce.” Misrepresentations or deceptive omissions of material fact constitute deceptive acts or practices prohibited by Section 5(a) of the FTC Act. It is also a violation of Section 5(a) of the FTC Act to place into the hands of another the means or instrumentalities of violating Section 5(a) of the FTC Act. Hence, the implication of Support.com’s deceptive role.

Bottom Line:

That scams occur is not shocking. However, that a scam of this nature would be committed by a public company that is a trusted household name is. It’s also the type of scam that is impossible to protect against, because there is no reason consumers should have suspected Office Depot of this type of conduct.

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William Galkin manages GalkinLaw. Mr. Galkin has dedicated his legal practice to representing Internet, e-commerce, computer technology and new media businesses across the U.S. and around the world. He serves as a trusted adviser to both startup and multinational corporations on their core commercial transactions.

  
                                                                                                         
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