9723128 UNITED STATES OF AMERICA In the Matter of BEYLEN TELECOM, LTD. and NITELINE MEDIA, INC., corporations, and RON TAN, individually and as an officer of NITELINE MEDIA, INC. DOCKET NO. C-3782 COMPLAINT The Federal Trade Commission, having reason to believe that Beylen Telecom, Ltd. and NiteLine Media, Inc., corporations, and Ron Tan, individually and as an officer of NiteLine Media, Inc. ("the Respondents"), have violated the provisions of the Federal Trade Commission Act, and it appearing to the Commission that this proceeding is in the public interest, alleges:
Course of Business 5. From at least December 1996 through January 1997, the Respondents Tan and NiteLine posted messages to newsgroups and operated and promoted one or more World Wide Web sites, including the web sites located at “www.erotic2000.com” and “www.erotica2000.com.” Through newsgroup messages and these web sites, Respondents Tan and NiteLine represented, expressly or by implication, that consumers could view “adult” images for free at sites on the Internet. A newsgroup is a collection of electronic messages, purportedly about a given topic, that consumers may read on the Internet. The World Wide Web or Web is a system used on the Internet for cross-referencing and retrieving information. A web site is a set of electronic documents, usually a home page and subordinate pages, readily viewable on computer by anyone with access to the Web, standard software, and knowledge of the web site’s location or address. 6. At one or more of the web sites operated by Respondents Tan and NiteLine and in one or more of their newsgroup messages, Respondents Tan and NiteLine stated that they offered "FREE XXX Images" for viewing at "FREE ADULT SITES." In addition, at one or more of their web sites, the Respondents Tan and NiteLine stated that the international sites they offered entailed:
7. Web sites operated by Respondents Tan and NiteLine instructed consumers that to view the “adult” images offered, the consumer had to first “download a special image viewer.” This “image viewer” was a software program, which was identified as “david.exe,” or “david7.exe,” or other similar names. 8. Contrary to the clear implication of the term “image viewer” that Respondents Tan and NiteLine used on their web sites to describe this software program, the “david.exe” (or similarly named software) was not merely a means for reading computer data and converting such data into visual images. Instead, this software, if downloaded, installed, and activated, would, without any explanations or adequate disclosures: (a) automatically terminate the consumer’s computer modem connection to the consumer’s local Internet service provider while maintaining the appearance that the computer modem remained connected to such local Internet service provider; (b) automatically direct the consumer’s computer modem to dial an international telephone number to re-connect to the Internet; (c) maintain the international long distance telephone connection thus established unless and until the consumer turned off the power switch to his computer or modem, or took other unusual action to terminate the telephone connection; and (d) caused the consumer to incur international long distance telephone charges on his telephone bill at rates in excess of $2.00 per minute for as long as the international long distance telephone connection was maintained. One of the techniques that this software employed to maintain the appearance that the computer modem remained connected to the consumer’s local Internet service provider was to automatically turn off the speaker on the consumer’s modem before dialing, thus preventing the consumer from hearing the sound of the international number being automatically dialed. 9. Prior to about January 23, 1997, Respondents Tan and NiteLine, at one or more of their web sites and in newsgroup messages, failed to disclose any of the events, described above in Paragraph 8, that automatically followed if one downloaded, installed and activated the purported "viewer" software. 10. Respondents Tan and NiteLine changed one or more of their web sites on or about January 23, 1997. Nevertheless, after that date, their web sites and newsgroup messages continued to fail to disclose that once a consumer downloaded, installed and activated the "viewer" software, it caused consumers to incur international long distance telephone charges at rates in excess of $2.00 per minute. In addition, web sites and news group messages posted by Respondents Tan and NiteLine continued to fail to disclose that the consumer’s computer modem would maintain the international long distance telephone connection unless and until the consumer turned off the power switch to his computer or modem or took other unusual action to terminate the telephone connection. 11. After about January 10, 1997, one or more of Respondents’ web sites stated if consumers downloaded their “viewer” software, the consumers’ computer modems would be connected to a site in Moldova, a former constituent state of the now-defunct Soviet Union. However, the computer modems of consumers who downloaded the software were not connected to a site located in Moldova, but rather were connected to a site located in Canada. Thus, even though the automatic telephone call generated by the “viewer” software went to Canada, the consumer was charged at the comparatively much higher per-minute rates for a call to Moldova. 12. Once a consumer had downloaded, installed and activated the purported “viewer” software offered by Respondents Tan and NiteLine, the consumer continued to incur international long distance telephone charges for as long as his computer modem was connected to the international long distance number and even after the consumer had exited Respondents Tan and NiteLine’s “adult” sites. 13. Respondents Tan and NiteLine’s promises of "free" Internet viewing of computer- stored images lured consumers from the U.S. and foreign countries into incurring hundreds of thousands of dollars in international long distance telephone charges. 14. Respondent BTL is a service bureau that provides telecommunications and other services to entities that promote international pay-per-call programs. In that capacity, Respondent BTL assigned Moldovan telephone numbers to Respondent NiteLine, as well as to Internet Girls, Inc. -- a defendant in the federal court action, FTC v. Audiotex Connection, Inc. CV-97 0726 (DRH) (E.D.N.Y. filed Feb. 13, 1997). Directly or indirectly, Respondent BTL also provided NiteLine and Internet Girls with the following services: a) daily telephone traffic and billing reports; b) the "david.exe" (or similarly named software) program and technical support for this "viewer" software program described above; c) text or graphics to use in soliciting consumers on the Internet, including information that Tan or NiteLine incorporated into newsgroup messages or that Tan, NiteLine, or Audiotex defendants William Gannon or Internet Girls incorporated into the web sites "www.erotic2000.com," "www.erotica2000.com," "www.sexygirls.com," "www.1adult.com," or "www.beavisbutthead.com"; and d) a termination point for audiotext calls, namely a site in Canada containing computer images for viewing. 15. A foreign telephone carrier contracted to pay Respondent BTL a portion of the revenues received from consumers for calls placed to specific international telephone numbers. Respondent BTL, in turn, contracted to pay Respondent NiteLine a per-minute rate for calls they generated to those specific international telephone numbers. (Respondent BTL contracted to pay defendant Internet Girls on a similar basis). Thus, Respondents BTL, Tan, and NiteLine were to receive a portion of the amount of international telephone charges incurred by consumers. Viewing Cost 16. In numerous instances, in the course of advertising, offering, offering for sale, or selling certain computer-stored images located at Internet sites, Respondents Tan and NiteLine represented to consumers, expressly or by implication, that consumers could view the images without cost by downloading, installing and activating purported "viewer" software. 17. In truth and in fact, once a consumer downloaded, installed and activated the purported "viewer" software to view computer-stored images located at Internet sites, the consumer incurred costs for an international long distance telephone call. 18. Therefore, the representations of Respondents Tan and NiteLine, as set forth in Paragraph 16, above, were false and deceptive, in violation of Section 5 of the FTC Act, 15 U.S.C. § 45. Software for Downloading 19. In numerous instances, in the course of advertising, offering, offering for sale, or selling certain computer-stored images located at Internet sites, Respondents Tan and NiteLine represented to consumers, expressly or by implication, that consumers could view the images by downloading, installing and activating purported "viewer" software. 20. In numerous instances, Respondents Tan and NiteLine failed to disclose or disclose adequately to consumers the material facts that, by downloading, installing, and activating the purported "viewer" software, the following would result:
21. In view of representations by Respondents Tan and NiteLine that consumers could view certain images located at Internet sites by downloading, installing and activating purported "viewer" software, as set forth in Paragraph 19, above, Respondents Tan and NiteLine’s failure to disclose or disclose adequately the material information set forth in Paragraph 20, above, was deceptive, in violation of Section 5 of the FTC Act, 15 U.S.C. § 45. 22. By providing Respondent NiteLine (and defendant Internet Girls) with telephone numbers, and by directly or indirectly providing the "viewer" software, text or graphics, or other goods or services described in Paragraphs 14 and 15, above, for the purpose of inducing consumers to call international telephone numbers, Respondent BTL provided the means and instrumentalities to others, and thereby acted in concert with others or knowingly and substantially assisted others, to engage in the deceptive acts and practices alleged in Paragraphs 16 through 21, above, in violation of Section 5 of the FTC Act, 15 U.S.C. § 45. Telephone Billing 23. In numerous instances, in the course of advertising, offering, offering for sale, or selling certain computer-stored images located at Internet sites, Respondents directly or through an intermediary caused charges for long distance calls to Moldova to appear on the telephone billing statements of consumers who downloaded, installed and activated Respondents’ purported "viewer" software. 24. In truth and in fact, the call that a consumer’s computer modem dialed when the consumer downloaded, installed and activated Respondents’ purported "viewer" software did not go to Moldova, which has high per-minute long distance telephone rates for calls from the United States, but instead went to Canada, which has comparatively much lower long distance rates for calls from the United States. 25. Therefore, Respondents’ practice of causing charges for long distance calls to Moldova to appear on the telephone billing statements of consumers who had downloaded, installed and activated Respondents’ purported "viewer" software, as set forth in Paragraph 23, above, was deceptive, in violation of Section 5 of the FTC Act, 15 U.S.C. § 45. 26. The acts and practices of Respondents as alleged in this complaint constitute unfair or deceptive acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act. THEREFORE, the Federal Trade Commission this twenty-third day of January, 1998, has issued this complaint against Respondents. By the Commission, Commissioner Thompson and Commissioner Swindle not participating. Donald S. Clark, SEAL: |