Markets Wired

The Federal Trade Commission and Department of Justice have halted the illegal conduct of an adult Web site that sent spam with false or misleading header information, that failed to include an opt-out mechanism, and that failed to include a valid postal address, all in violation of federal law. A final court order will bar violations of the CAN-SPAM Act in the future, require the defendants to establish an effective monitoring program for their affiliates, and impose a $75,000 civil penalty.

According to the FTC, since at least January 2006 the defendants have used affiliates who sent spam intended to drive users to the defendants’ adult Web sites, including sexyfriendsearch.com, an Internet dating service where they collect payment for memberships. The affiliates, who are paid commissions for referrals who sign up as members, send spam with lurid subject lines that contains hyperlinks to the defendants’ Web sites.

The FTC alleges the e-mails contain false header information so it is difficult or impossible to determine the identity of the sender. In addition, the e-mails fail to provide clear and conspicuous notification that consumers can opt-out of receiving future e-mails. Finally, the e-mails fail to include a valid physical postal address of the sender. The CAN-SPAM Act requires that commercial e-mail contain accurate header information, an opt-out mechanism to allow consumers to stop receiving messages they are not interested in, and a valid physical postal address. The agency alleged the defendants violated the law.

The settlement bars future violations of the CAN-SPAM Act and requires the defendants to establish a monitoring program to assure that their affiliates comply with the law. Based on the defendants’ inability to pay, a judgment of $442,900 – the amount the defendants made from the illegal spam – will be suspended upon payment of a $75,000 civil penalty. Should the court find that the defendants misrepresented their financial status, the entire amount will be due. Finally, the settlement contains record keeping requirements to allow the FTC to monitor compliance.

The defendants named in the case are ATM Global Systems, Inc. and it principals, Mark Richman and Nathaniel Seidman.

The Commission vote to approve the settlements was 5-0.

The stipulated final judgment and order was filed on May 2, 2008 in the U.S. District Court for the Northern District of Illinois by the DOJ at the request of the FTC.

NOTE: Stipulated final judgments and orders are for settlement purposes only and do not constitute an admission by the defendant of a law violation. A consent order is subject to court approval and has the force of law when signed by the judge.

Copies of the documents mentioned in this release are available from the FTC’s Web site at http://www.ftc.gov and from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, click http://www.ftc.gov/ftc/complaint.shtm or call 1-877-382-4357. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to more than 1,600 civil and criminal law enforcement agencies in the U.S. and abroad. For free information on a variety of consumer topics, click http://www.ftc.gov/bcp/consumer.shtm.