Markets Wired

An operation that downloaded onto consumers’ computers software that spawned pop-up messages claiming consumers had signed up for a “free trial” that had expired, and demanding payment to make the messages go away, has settled Federal Trade Commission charges that its practices violated federal law. The consent agreement requires the defendants to provide a way for consumers to remove the software, bars future downloads without consumers’ consent, and requires the defendants to pay more than $500,000 for consumer redress.

In August 2006, the FTC filed a complaint in U.S. district court alleging that the operators of the movieland.com, moviepass.tv, and popcorn.net Web sites downloaded software that repeatedly disrupted consumers’ computer use with a sequence of large pop-ups, accompanied by music, that lasted nearly a minute and could not be closed or minimized. According to the complaint, these pop-ups demanded that consumers pay the defendants as much as $99.00 to end the recurring pop-up cycle, claiming that consumers had signed up for a three-day “free trial” to use the defendants’ Internet download services and had not cancelled their “license” before the trial period ended.

Hundreds of consumers complained to the FTC. Many claimed they had never signed up for the “free trial” and had never even heard of the Internet download services until they got their first demand for payment. The FTC also charged that the defendants made it difficult or impossible for consumers to uninstall the software. Consumers attempting to remove the software through the Windows Control Panel Add/Remove function allegedly were redirected to a Web page telling them that they had to pay a fee to stop the pop-ups. According to the FTC, the only way many consumers could regain control of their computers was to pay the defendants to stop the pop-ups, or pay a computer technician to help them. The FTC charged that the scheme was unfair and deceptive and violated federal law. The settlement announced today ends the litigation.

The settlement prohibits the defendants from using the Internet to offer “anonymous” free trials with a negative-option feature. It also bars the defendants from misrepresenting that a consumer has consented to receive pop-up payment demands and from misrepresenting that consumers are obligated to pay the defendants. In addition, the settlement bars the defendants from using the Internet to download software to consumers’ computers without their consent, restricts the number of pop-up windows or banners the defendants’ software can display regarding a consumer’s purported payment obligations, and requires that such pop-ups contain a mechanism to allow a consumer to close them and to silence any accompanying audio. The settlement also bars the defendants from attempting to conceal their software from consumers and bars them from downloading software that automatically reinstalls itself after consumers have removed it. The settlement requires that the defendants’ software programs include a mechanism to allow consumers to remove them and requires that the defendants post uninstall instructions on the movieland.com, moviepass.tv, and popcorn.net Web sites. The defendants must also stop the recurring billing enrollment of consumers who have not, within the past 60 days, accessed the content on their Web sites and must e-mail the uninstall instructions to those consumers.

The settlement requires the defendants to pay $501,367.95 for consumer redress. Should the court later find that the defendants misrepresented financial information provided to the Commission, the settlement calls for the court to enter a judgment of $1,801,015.16. The defendants will provide the FTC with a database of consumers who are eligible for redress so eligible consumers do not need to contact the FTC to receive redress.

The settlement agreement contains standard bookkeeping and record-keeping provisions to allow the FTC to monitor compliance.

The FTC complaint named Digital Enterprises, Inc., d/b/a Movieland.com, a California corporation; Triumphant Videos, Inc., d/b/a Popcorn.net, a California corporation; Pacificon International, Inc., d/b/a Vitalix, a California corporation; Alchemy Communications, Inc., a California corporation; AccessMedia Networks, Inc., a Delaware corporation; Innovative Networks, Inc., a California corporation; Film Web, Inc., a Wyoming corporation; Binary Source, Inc., d/b/a Moviepass.tv, a California corporation; Mediacaster, Inc., d/b/a Mediacaster.net, a Delaware corporation; CS Hotline, Inc., a California corporation; Easton Herd; and Andrew Garroni. The Commission also voted to amend the complaint to add as defendants Frostham Marketing, Inc., a Florida corporation; and Longview Media, Inc., a California corporation.

The Commission vote to amend the complaint and accept the settlement was 5-0. The case was filed in the United States District Court for the Central District of California.

Note: A consent agreement is for settlement purposes only and does not constitute an admission by the defendant of a law violation. This agreement was signed by the judge September 5, 2007, entered by the court September 11. Settlements 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.