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[rr] States Asked to Examine Microsoft Internet Service

>From Reuters through Yahoo Daily News:

Tuesday January 29 4:27 PM ET 
States Asked to Examine Microsoft Internet Service
By Andy Sullivan

WASHINGTON (Reuters) - A privacy group on Tuesday asked state law enforcement 
authorities to examine software giant Microsoft Corp.'s (Nasdaq:MSFT - news) 
Passport online identity service, saying it exposes consumers to fraud, junk 
electronic mail and identity theft.

The Electronic Privacy Information Center sent a letter to all 50 state 
attorneys general, asking them to protect consumers against what it called 
Microsoft's unfair and deceptive trade practices because the federal 
government has failed to act.

Launched in 1999, Passport aims to simplify Internet transactions by allowing 
consumers to store passwords, credit-card numbers and other personal 
information in one location.

Microsoft claims it has created more than 200 million Passport accounts, 
mostly through Hotmail, its free e-mail service.

The service has drawn the ire of the Electronic Privacy Information Center 
and other privacy groups, who say it allows Microsoft to track and profile 
Internet users, encourages junk e-mail, and exposes consumers to identity 
theft by inadequately protecting their credit-card numbers.

Microsoft temporarily disabled some Passport functions last fall after a 
security expert demonstrated that he could hijack a Passport account by 
getting its owner to open a Hotmail message.

Privacy groups want Microsoft to back off on claims that Passport is secure 
and protects consumer privacy, and allow consumers to delete the accounts 
they have set up so far.

A Microsoft spokesman said EPIC's allegations were not true.

Microsoft does not share personal information with third parties, said 
spokesman Rick Miller, unless users voluntarily use Passport to access 
third-party sites.

Passport does not encourage junk e-mail, Miller said, because it simply 
replaces other authentication services that would have asked for users' 
e-mail addresses anyhow.

And no harm has come from security holes because Passport users have not had 
their credit-card numbers stolen, he said. Perfect security is impossible to 
guarantee in a world where millions of users are connected on the Internet, 
he said.

``It's not a Passport thing, it's an Internet thing,'' Miller said.

EPIC said it was appealing to the states because the Federal Trade Commission 
has not taken action since EPIC and other groups asked it to investigate 
Passport last summer.

An FTC spokesman would not confirm or deny whether the agency was 
investigating Passport, but added that the agency was aware of the 
controversy and was following developments in the press.

Chris Hoofnagle, EPIC legislative counsel, said states have often taken a 
more aggressive approach to privacy matters. Attorneys general in Minnesota 
and New York have recently pursued banks for privacy violations, and 
California state law establishes a strong right to privacy, he said.

``The states have been on the forefront of privacy protection and consumer 
protection generally,'' Hoofnagle said.

The environmental movement has found success at the state level as well, he 

EPIC also plans to use European Union (news - web sites) privacy laws to go 
after Passport, Hoofnagle said.

``We will file a complaint with the FTC on that issue in the near future,'' 
he said.

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