Markets Wired

Operators who infected more than 15 million computers with destructive, intrusive spyware will give up $330,000 in ill-gotten gains from their venture to settle FTC charges that their scam violated federal law. The settlement will bar the defendants from downloading software onto consumers’ computers without disclosing its function and obtaining consumers’ consent prior to installation, bars them from downloading software that interferes with consumers’ computer use, and bars false or misleading claims.

In November 2006, the FTC charged ERG Ventures, LLC and its principals with tricking consumers into downloading malevolent software by hiding the Media Motor program within seemingly innocuous free software, including screensavers and video files. Once downloaded, the Media Motor program silently activated itself and downloaded “malware” that was intrusive, disruptive, and made it difficult for consumers to use their computers. The software changed consumers’ home pages, tracked their Internet activity, altered browser settings, degraded computer performance, and disabled anti-spyware and anti-virus software. Many of the malware programs installed by the Media Motor program were extremely difficult or impossible for consumers to remove from their computers.

The FTC charged that ERG Ventures and its principals violated the FTC Act, which bars unfair and deceptive practices. Specifically, the FTC alleged that the defendants failed to disclose to consumers that the free software they offered was bundled with malware. The agency also charged the defendants with using a deceptive End User License Agreement, which gave consumers the option to halt the installation of all software from ERG Ventures, but secretly installed malware whether consumers accepted or rejected the terms of the agreement. The agency also charged the defendants with unfairly downloading software that causes substantial harm to consumers. At the request of the FTC, the U.S. District Court for the District of Nevada froze the defendants’ assets and ordered a halt to their spyware operation pending trial.

The stipulated final order announced today ends that litigation with these defendants.

The order will permanently bar the defendants from distributing software that interferes with consumers’ computers, including software that tracks consumers’ Internet activity or collects other personal information; generates disruptive pop-up advertising; tampers with or disables other installed programs; or installs other advertising software onto consumers’ computers. The defendants will also be required to fully disclose the name and function of all software they install on consumers’ computers in the future, and to provide consumers with the option to cancel the installation after viewing the disclosure. The defendants will give up $330,000 in ill-gotten gains. Should the court find that the defendants misrepresented their financial status, $3,595,925 – the total revenues from their scam – will be due.

The order names ERG Ventures, LLC, as well as Elliott S. Cameron, Robert A. Davidson II, and Garry E. Hill d/b/a Media Motor, Joysticksavers.com and PrivateinPublic.com.

The Commission vote to accept the stipulated order was 5-0.

The FTC’s case was brought with assistance from the Microsoft Corporation.

NOTE: Stipulated final judgments and orders are for settlement purposes only and do not constitute an admission by the defendant of a law violation. Consent orders have the force of law when signed by the judge.

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://ftc.gov/bcp/consumer.shtm.