Operators that allegedly used deceptive spam messages and appeals to patriotism to sell Web addresses that don't work, including ".usa," have agreed to settle Federal Trade Commission charges that the scam violated federal laws. The settlement will bar the defendants from misrepresenting the usability of domain names, require the disclosure of limitations or conditions on the use or function of domain names, and bar the operators from selling their customer lists. The settlement also will provide as much as $300,000 for consumer redress.
In March 2002, at the request of the FTC, a U.S. district court shut down businesses that sold domain names ending with suffixes such as ".brit," and ".scot," and ordered an asset freeze to preserve money for consumer redress. The FTC alleged that after September 11, the companies launched an aggressive spam campaign in the United States to advertise domain names ending in ".usa." Subject lines in their e-mail read, "Be Patriotic! Register .USA Domains." A hyperlink in the e-mail connected consumers to a Web site where they were offered the advertised domain names for $59 each. The FTC alleged that the companies were not accredited domain name registrars, that the ".usa" domain names are not usable on the Internet, and that they probably never will be useable. The FTC has asked the court to permanently bar the operation from deceptively selling the domain names and to order consumer redress. The settlement announced today ends that litigation.
The settlement bars the defendants from making misrepresentations about the usability of domain names or about the nature of any product or service they sell over the Internet. The settlement also bars the defendants from failing to clearly and conspicuously disclose material limitations or conditions on the usability or functionality of domain names. The settlement bars the defendants from selling customer lists. In addition, the defendants will turn over as much as $300,000 being held in merchant accounts for consumer redress. Redress payments will be available to consumers in the UK and other countries, as well as the United States. The settlement also contains record-keeping requirements to allow the FTC to monitor compliance with the court's order.
The original complaint named TLD Network Ltd., Quantum Management (GB) Ltd., TBS Industries Ltd., Thomas Goolnik, and Edward Harris Goolnik of the United Kingdom. The FTC amended its complaint to dismiss Edward Harris Goolnik as a defendant and to add another entity, Quantum Management U.S., Inc., as a defendant.
The Commission vote to accept the stipulated final judgment and order was 5-0.
(FTC File No. X02 0026)
(Civil Action No. 02 C 1475)