"Spam" e-mail messages claiming that consumers had won a free Sony PlayStation 2 or other prize through a promotion purportedly sponsored by Yahoo, Inc., instead routed consumers to an adult Internet site via a 900-number modem connection that charged them up to $3.99 a minute, according to a complaint filed under seal by the Federal Trade Commission on March 27 and announced today. The complaint was brought as part of the recent International Netforce law enforcement effort, in which the FTC joined eight state law enforcers in the United States and four Canadian agencies in investigating and bringing 63 actions against a wide range of Internet scams for allegedly sending deceptive unsolicited e-mail and engaging in Web fraud.
According to the FTC, when consumers responded to a spam e-mail message telling them that they had won the game system, they were directed to a Web page that imitated the authentic Yahoo page. The imitation Yahoo Web site instructed consumers to download a program that would supposedly allow them to connect "toll-free" to a Web site where they could enter their name and address to claim their PlayStation. Consumers who followed the instructions were connected to a pornographic Web site through a 900-number, where they incurred significant per- minute charges.
"This case involves 'bait-and-switch' of the worst kind," said J. Howard Beales, III, Director of the FTC's Bureau of Consumer Protection. "The spammers promised a product that's particularly attractive to kids. They delivered a product that's offensive to many adults, and totally inappropriate for kids. Consumers were told it was free, but they were charged minute-by-minute. The FTC has put a stop to it."
The complaint announced today named as defendants Rik Covell, Adam Lewis, BTV Industries, National Communications Team, Inc., LO/AD Communications Corp., and Nicholas Loader. At the request of the FTC, a U.S. District Court has halted the scheme and frozen the corporations' assets pending a preliminary injunction hearing. The agency alleges that the scam has caused millions of dollars in consumer injury, and has asked the court to preserve the assets for consumer redress.
According to the Commission, the goal of the entire scheme was to lure consumers to the defendants' adult Web site and to collect fees through the use of a 900-number service. While the spam message deceptively stated that the consumer was the winner of a Yahoo Sweepstakes contest and was entitled to a free PlayStation, consumers who followed the directions and tried to collect their "free" prize found there was no claim form on the linked site and no PlayStation either.
The Commission charged the defendants with violating the FTC Act and the Pay-Per-Call Rule, which implements the requirements of the Telephone Disclosure and Dispute Resolution Act of 1992. The FTC's complaint alleged that the defendants' practices were deceptive and misled consumers, through their claims: 1) that consumers had won a prize; 2) that Yahoo sent the e-mail; and 3) that the connection to the Web site was toll-free. Additionally, the FTC said the defendants violated the Pay-Per-Call Rule by not disclosing the cost of connecting to the Web site and by not providing an audio introductory disclosure message when consumers connected to the Internet through the 900-number.
In its complaint, the FTC is seeking a permanent injunction and other equitable relief, including consumer redress. The Commission vote authorizing staff to file the complaint was 4-0, with Commissioner Sheila Anthony not participating. The complaint was filed under seal in U.S. District Court for the District of Nevada on March 27, 2002. The seal was lifted on April 22, 2002.
NOTE: The Commission files 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 has actually 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), or use the complaint form at http://www.ftc.gov. The FTC enters Internet, telemarketing, identity theft and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.
(FTC File No. 022-3064)
(Civil Action No. CV-S-02-0437-LRH
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