UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WASHINGTON

FEDERAL TRADE COMMISSION, Plaintiff,

v.

CYBERSPACE.COM, LLC, FRENCH DREAMS, COTO SETTLEMENT, ELECTRONIC PUBLISHING VENTURES, LLC, OLYMPIC TELECOMMUNICATIONS, INC., IAN EISENBERG, and  CHRIS HEBARD, Defendants.

COMPLAINT FOR INJUNCTION AND OTHER EQUITABLE RELIEF

Plaintiff, the Federal Trade Commission ("Commission"), by its undersigned attorney, alleges:

1. This is an action under Sections 5(a) and 13(b) of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C.   45(a) and 53(b), to secure injunctive and other equitable relief, including rescission of contracts, restitution, and disgorgement for defendants' deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C.  45(a), in connection with the marketing and sale of Internet services.

JURISDICTION AND VENUE

2. This Court has jurisdiction over this matter pursuant to 15 U.S.C.  45(a) and 53(b), and 28 U.S.C.  1331, 1337(a) and 1345.

3. Venue in this District is proper under 15 U.S.C.  53(b), and 28 U.S.C.  1391(b) and (c).

PLAINTIFF

4. Plaintiff, Federal Trade Commission, is an independent agency of the United States Government created by statute. 15 U.S.C.  41-58. The Commission enforces Section 5(a) of the FTC Act, 15 U.S.C.  45(a), which prohibits unfair or deceptive acts or practices in or affecting commerce. The Commission is authorized to initiate federal district court proceedings to enjoin violations of the FTC Act and to secure such equitable relief as may be appropriate in each case, including restitution for injured consumers. 15 U.S.C.  53(b).

DEFENDANTS

5. Defendant Cyberspace.com, LLC, is a limited liability company formed in Delaware. Cyberspace.com transacts or has transacted business in the Western District of Washington.

6. Defendant French Dreams is an owner of defendant Electronic Publishing Ventures, LLC. French Dreams transacts or has transacted business in the Western District of Washington.

7. Defendant Coto Settlement, a Cook Island Trust, is an owner of defendant Electronic Publishing Ventures, LLC. Coto Settlement transacts or has transacted business in the Western District of Washington.

8. Defendant Electronic Publishing Ventures, LLC, ("EPV") is a limited liability company formed in Delaware. EPV owns Cyberspace.com. EPV transacts or has transacted business in the Western District of Washington.

9. Defendant Olympic Telecommunications, Inc. is a corporation formed in Delaware, with offices at 2722 Eastlake Avenue, Seattle, Washington. Olympic Telecommunications transacts or has transacted business in the Western District of Washington.

10. Defendant Ian Eisenberg is the President of defendant Olympic Telecommunications, Inc., and is a principal of defendant French Dreams. At all times material to this complaint, acting alone or in concert with others, he has formulated, directed, controlled, or participated in the acts and practices set forth in this complaint. He transacts or has transacted business in the Western District of Washington.

11. Defendant Chris Hebard is a principal of defendant Coto Settlement. At all times material to this complaint, acting alone or in concert with others, he has formulated, directed, controlled, or participated in the acts and practices set forth in this complaint. He transacts or has transacted business in the Western District of Washington.

COMMERCE

12. At all times material hereto, defendants have been engaged in the business of offering for sale, selling, and billing for, Internet-related services, including access to the Internet and other products, in or affecting commerce, as "commerce" is defined in Section 4 of the FTC Act, 15 U.S.C.  44.

DEFENDANTS' BUSINESS ACTIVITIES

13. Since at least January 1999, defendants have sold, via the U.S. mail, access to the Internet and other Internet-related services ("Internet service") to consumers and small businesses (collectively, "consumers"). Defendants charge consumers $19.95 or $29.95 per month for their Internet service. Defendants arrange for these charges to appear on consumers' local telephone bills.

14. Defendants mail checks for $3.50, and an invoice-like form attached to the check, to consumers throughout the country. Any consumer who deposits or cashes defendants' checks is automatically signed up by defendants for their Internet service. Defendants than charge consumers $19.95 or $29.95 per month.

15. Defendants' check and the invoice-like form represent that defendants have a prior or ongoing business relationship with the recipient of the mailing. The face of the check includes the consumer's name, and next to the "RE," the consumer's telephone number. The detachable invoice-like form includes numerous categories, two of which are "Account Number" and "Invoice Number." The face of the invoice-like form includes, under "Description", the letters "ISP-SUB." Nothing on the face of the check or the invoice-like form alerts the consumer that depositing or cashing the check signs the consumer up for defendants' Internet service at $19.95 or $29.95, plus taxes.

16. Many consumers process defendants' checks as they do all other checks they receive, and do not know that they are signing up for Internet access at a monthly fee.

17. Defendants claim that they send those who deposit or cash their check a compact disc ("CD") with software for using the Internet service. However, because many consumers do not know they have been signed up for Internet service, they have no recollection of receiving the CD.

18. At some point, consumers discover that defendants have signed them up for defendants' Internet service and are charging them monthly. In many instances, because of the unexpected placement of defendants' charges on their local telephone bills, many consumers discover they have inadvertently paid the charges for many months despite the fact that they never used defendants' Internet service.

19. When consumers do notice the charges, they contact defendant Olympic Telecommunications, whose telephone number often appears on their telephone bill next to the charge from defendant Cyberspace, to complain that the monthly charges are unauthorized. In many instances, a customer service representative from defendant Olympic refers the caller to defendant Cyberspace. However, the caller is often unable to reach defendant Cyberspace by telephone or otherwise to find out about the unauthorized charge. When they do reach defendant Cyberspace, consumers learn, usually for the first time, that they have been signed up for defendants' Internet service at a monthly charge of $19.95 or $29.95, plus taxes.

20. Defendants' policy is that consumers can cancel the Internet service at any time. However, consumers experience numerous difficulties in trying to cancel their account. Consumers try to cancel via defendants' automatic cancellation telephone system, where, in many instances, they experience difficulty and are unable to cancel. In other instances, defendants promise to cancel the account for the future, yet defendants' charges continue to appear on customers' subsequent telephone bills.

21. Defendants' policy is to provide a full refund if a subscriber cancels the account within 30 days of depositing or cashing the check. However, consumers are unable to cancel within the 30-day full refund period because defendants' charges first arrive well after the 30-day period has elapsed. Even when consumers are able to cancel within the 30-day period, in many instances defendants do not provide a full refund.

VIOLATIONS OF SECTION 5 OF THE FTC ACT

22. As set forth below, defendants have violated Section 5(a) of the FTC Act, 15 U.S.C.  45(a), in connection with the offer, sale of, and billing for Internet service.

COUNT ONE

23. In numerous instances, defendants have represented, expressly or by implication, that consumers who receive defendants' charges on a bill are legally obligated to pay for those charges.

24. In truth and in fact, in numerous instances, consumers have not agreed to be charged and are not legally obligated to pay defendants' charges.

25. Therefore, defendants' representation, as alleged in Paragraph 23, is false and deceptive, and violates Section 5(a) of the FTC Act, 15 U.S.C.  45(a).

COUNT TWO

26. In numerous instances, defendants have represented, expressly or by implication, to consumers that defendants' solicitation check is a refund, rebate, receivable, or other payment for services based on a prior or ongoing business relationship.

27. In truth and in fact, the solicitation check is not a refund, rebate, receivable, or other payment for services based on a prior or ongoing business relationship; rather, it is a check which, when cashed or deposited, defendants use to initiate a business relationship by signing up the consumer for defendants' Internet service billed monthly on the consumer's local telephone bill.

28. Therefore, defendants' representation, as alleged in Paragraph 26, is false and deceptive, and violates Section 5(a) of the FTC Act, 15 U.S.C.  45(a).

COUNT THREE

29. In numerous instances, defendants have represented, expressly or by implication, that consumers who receive defendants' solicitation check for $3.50 may deposit or cash the check.

30. In truth and in fact, defendants have failed to disclose clearly and conspicuously the material conditions associated with depositing or cashing defendants' solicitation check, including, but not limited to, the conditions that upon depositing or cashing the check, defendants:

(a) will sign up the consumer for defendants' Internet service; and
 
(b) will place a monthly charge on the consumer's telephone bill for defendants' Internet service.

31. In view of defendants' failure to disclose clearly and conspicuously the material information set forth in Paragraph 30, above, defendants' representation in Paragraph 29 is false and deceptive, and violates Section 5(a) of the FTC Act, 15 U.S.C.  45(a).

CONSUMER INJURY

32. Consumers in many areas of the United States have suffered substantial monetary loss as a result of defendants' unlawful acts or practices. In addition, defendants have been unjustly enriched as a result of their unlawful practices. Absent injunctive relief by this Court, defendants are likely to continue to injure consumers and harm the public interest.

THIS COURT'S POWER TO GRANT RELIEF

33. Section 13(b) of the FTC Act, 15 U.S.C.  53(b), empowers the Court to grant injunctive and other equitable ancillary relief, including consumer redress, disgorgement, and restitution, to prevent and remedy violations of any provision of law enforced by the Commission.

PRAYER FOR RELIEF

Wherefore, Plaintiff requests that this Court:

1. Award Plaintiff such preliminary injunctive and ancillary relief as may be necessary to avert the likelihood of consumer injury during the pendency of this action, and to preserve the possibility of effective final relief;
 
2. Permanently enjoin defendants from violating the FTC Act, as alleged herein; 3. Award such relief as the Court finds necessary to redress injury to consumers resulting from defendants' violations of the FTC Act, including but not limited to, rescission of contracts, refund of monies paid, and disgorgement of ill-gotten monies; and
 
4. Award Plaintiff the costs of bringing this action, as well as such other and additional equitable relief as the Court determines to be just and proper.

Dated: ,2000

Respectfully submitted,

COLLOT GUERARD
STEPHEN GURWITZ
MICHAEL GOODMAN
Federal Trade Commission
600 Pennsylvania Ave. NW, Suite 238
Washington, DC 20580
202-326-3338 (office)
202-326-3395 (fax)
cguerard@ftc.gov (email)