A United States District Court has halted the operation of a Web site hosting service that advertised services for flat fees ranging from $10 to $15 dollars but then crammed unauthorized charges of up to $20,000 onto consumers' credit cards for supposed "excess bandwidth" use. At the Federal Trade Commission's request, the court has halted the illegal billing, frozen the defendants assets and appointed a receiver to oversee the business, pending trial.
The FTC suit names Bryan Kruchten, doing business as Page Creators and Trinity Host, L.L.C. The defendants are based in suburban Minneapolis, Minnesota.
According to the FTC, the defendants used the Internet to advertise "discount" Web hosting services - such as domain name registry, Web page design and technical support - for monthly service fees of $10 to $15. Consumers provided credit card numbers so that they could be billed. Without their knowledge or approval, the defendants allegedly later charged many of their customers huge additional fees, in amounts sometimes as large as $20,000, for such things as "excess bandwidth" use. The FTC alleged that the additional charges were fraudulent. Computer server logs showed that the customers did not actually use anywhere near the amount of bandwidth for which they were billed. In fact, in some cases, the defendants billed individual customers for allegedly using more bandwidth than all their customers combined. In fact, the FTC told the court, the defendants charged "excess bandwidth" fees to consumers who had not yet constructed their Web sites, to consumers who had already canceled their services and to consumers who had signed up to receive "unlimited" bandwidth.
When consumers, financial institutions and even the Minnesota Attorney General's office challenged the validity of the charges, Kruchten produced reports generated by two types of computer software to prove that the charges were legitimate. But the people who wrote the sofware that supposedly produced the reports state that the defendant doctored the reports and the "proof" was phony, the FTC told the court.
The agency alleges that Kruchten and his companies violated federal law when they misrepresented that consumers owed money for excess bandwidth and when they placed unauthorized charges on consumers' credit cards.
The agency will seek to permanently bar the illegal actions and has asked the court to order redress for consumers who were illegally charged.
The Commission vote to file the complaint was 5-0.
The complaint was filed with the invaluable assistance of the Minnesota Attorney General's office and the Civil Division of the U.S. Attorney's Office in the District of Minnesota. The case was filed March 26, under seal. The seal was lifted March 30.
NOTE: The Commission authorizes the filing of a complaint when it has "reason to believe" that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant actually has violated the law. The case will be decided by the court.
Copies of the complaint are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. To file a complaint, or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357). The FTC enters Internet, telemarketing and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies worldwide.
Farrell Office of Public Affairs
C. Steven Baker or Steven M. Wernikoff
(Civil Action No. 01-523ADM/RLE)
(FTC File No. 012 3040