STATES DISTRICT COURT FOR THE
FEDERAL TRADE COMMISSION, Plaintiff,
AUDIOTEX CONNECTION, INC., d/b/a Electronic Forms Management, www.sexygirls.com, www.beavisbutthead.com, www.1adult.com,
PROMO LINE, INC., d/b/a Electronic Forms Management, www.sexygirls.com, www.beavisbutthead.com, www.1adult.com,
INTERNET GIRLS, INC., d/b/a Electronic Forms Management, www.sexygirls.com, www.beavisbutthead.com, www.1adult.com, and
WILLIAM GANNON, individually, d/b/a Electronic Forms Management, www.sexygirls.com, www.beavisbutthead.com, www.1adult.com, and as an officer of AUDIOTEX CONNECTION, INC., PROMO LINE, INC., and INTERNET GIRLS, INC.,
DAVID ZENG, individually and d/b/a DaveZ@aol.com, Defendants.
Civil Action No. CV-97 0726 (DRH)
CONSENT DECREE AND ORDER
Plaintiff, Federal Trade Commission ("FTC" or "Commission"), filed a complaint for permanent injunction and other relief in this matter, pursuant to Section 13(b) of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. §53(b), and the parties (except for Internet Girls, Inc.) conferred, through counsel, and previously agreed to a Stipulated Preliminary Injunction. Now, the Commission files an amended complaint, and all of the parties to this action, except Anna M. Grella against whom the original complaint is being dismissed with prejudice, through counsel, agree to a settlement of this action without adjudication or admission of any issue of fact or law and without the defendants admitting liability for any of the violations alleged in the original complaint or amended complaint (collectively the "Complaint") or of any wrongdoing whatsoever. THEREFORE, on the joint motion of the parties, it is hereby ORDERED, ADJUDGED and DECREED as follows:
1. This Court has jurisdiction of the subject matter of this case, and of all parties hereto;
2. The Commission's Complaint alleges a claim upon which relief can be granted against the defendants under Section 5(a) of the FTC Act, 15 U.S.C. §45(a);
3. Internet Girls, Inc. consents to the amendment of the Commission's original complaint solely to name Internet Girls, Inc. as a defendant.
4. Defendants have been served personally or have consented to service through counsel; therefore, process and service of process have been effected under Fed. R. Civ. P. 4;
5. The plaintiff and each defendant, through counsel, have agreed to the terms of a Consent Decree and Order as provided herein;
6. This Consent Decree and Order does not constitute and shall not be interpreted to constitute an admission by any defendant that such defendant has engaged in violations of the FTC Act or any law, nor does it constitute evidence against or an admission by any defendant with respect to any issue of law or fact herein or any fact alleged in the Commission's Complaint;
7. Weighing the equities and the agreement of the parties, the entry of this Order is in the public interest; and
8. Plaintiff and Defendants hereby waive all rights to appeal or otherwise challenge or contest the validity of the Order.
For purposes of this Consent Decree and Order, the following definitions shall apply:
1. "Defendants A" means Promo Line, Inc., Audiotex Connection, Inc., Internet Girls, Inc., and William Gannon, d/b/a Electronic Forms Management, "www.sexygirls.com," "www.beavisbutthead.com," or "www.1adult.com," and their successors, assigns, shareholders, officers, agents, servants, employees, and those persons in active concert or participation with them who receive actual notice of this Order by personal service or otherwise, whether acting through any corporation, subsidiary, division, or other device.
2. "Defendant B" means David Zeng and his successors, assigns, officers, agents, servants, employees, and those persons in active concert or participation with them who receive actual notice of this Order by personal service or otherwise, whether acting through any corporation, subsidiary, division, or other device.
3. "Defendants" means Defendants A and Defendant B.
4. "Clearly and Conspicuously" shall mean as follows:
In an advertisement communicated through an electronic medium (such as television, video, radio, and interactive media such as the Internet and online services), the disclosure shall be presented simultaneously in both the audio and video portions of the advertisement. Provided, however, that in any advertisement presented solely through video or audio means, the disclosure may be made through the same means in which the ad is presented. The audio disclosure shall be delivered in a volume and cadence sufficient for an ordinary consumer to hear and comprehend it. The video disclosure shall be of a size and shade, and shall appear on the screen for a duration, sufficient for an ordinary consumer to read and comprehend it. In addition to the foregoing, in interactive media the disclosure shall also be unavoidable and shall be presented prior to the consumer incurring any financial obligation. The disclosure shall be in understandable language and syntax. Nothing contrary to, inconsistent with, or in mitigation of the disclosure shall be used in any advertisement.
5. "Document" is synonymous in meaning and equal in scope to the usage of the term in Federal Rule of Civil Procedure 34(a), and includes writings, drawings, graphs, charts, photographs, audio and video recordings, computer records, and other data compilations from which information can be obtained. A draft or non-identical copy is a separate document within the meaning of the term.
6. "David.exe" means a software program that, as alleged in the Commission's Complaint, each Defendant has promoted, offered, distributed, or provided on any web site as a "viewer," which consumers may download, install, and execute, and which dials an international long-distance telephone number for which a fee is charged.
7. "Eligible Consumer" means a telephone subscriber that was billed for international long distance calls to Moldova from December, 1996 through February, 1997 to one of the telephone numbers listed in Schedule A, annexed hereto.
8. "Relevant Charges" means the dollar amount billed by AT&T, MCI, Sprint or another long distance carrier to an Eligible Consumer for international long distance calls to Moldova from December 1996 through February 1997, to one of the telephone numbers listed in Schedule A, annexed hereto.
IT IS THEREFORE ORDERED, ADJUDGED and DECREED that, in connection with using the Internet to place international long distance telephone calls, each defendant is hereby permanently restrained and enjoined from violating Section 5(a) of the FTC Act, 15 U.S.C. §45(a) by:
A. Representing, either directly or by implication, that a consumer may download, install, activate, or use a software program to view computer-stored images without cost, unless there are no costs to consumers arising from such activity.
B. Representing, either directly or by implication, that a consumer may view computer-stored images by downloading, installing and activating a software program known as "David.exe" or any other substantially similar software, unless such defendant clearly and conspicuously discloses, in close proximity to the representation, any material facts concerning costs and consequences to a consumer that result from downloading, installing, and activating such software, including, but not limited to, the following:
1. That the consumer's computer will terminate its modem connection to the consumer's usual Internet service provider;
2. That the consumer's modem will dial an international long-distance telephone number and establish a long-distance telephone connection with some remote location outside the United States;
3. (a) A statement that "International long distance telephone charges to [insert country of call termination] apply"; and
(i) a statement that "This call may cost you as much as [insert the maximum estimate of possible per-minute tariffed charge available through one of the three largest U.S. long-distance carriers (e.g. MCI, Sprint or AT&T; hereafter "a major U.S. carrier")] per minute"; or
(ii) a stated range of possible costs per-minute for the call, where the maximum possible per-minute charge available through a major U.S. carrier is disclosed at least as prominently as any lower estimate of possible charges, and the lower estimate is based on a non-promotional standard tariffed charge available through a major carrier, and there is a clear and conspicuous disclosure of the following statement: "To determine your exact per-minute charges, contact your long distance carrier."; and,
4. That, once connected, the consumer's computer modem will not terminate the international long-distance telephone connection to the remote service provider unless and until: (a) the consumer terminates the connection by using a "disconnect" feature that is displayed on the screen throughout the connection; OR (b) the call is terminated automatically after some specific, stated period of time (e.g. after 5 minutes); OR (c) the consumer turns off the power switch to his computer or modem, or takes other drastic and unusual action to terminate the telephone connection, if neither (a) nor (b) above are applicable.
IT IS FURTHER ORDERED that:
A. Each defendant is hereby permanently restrained and enjoined from violating Section 5(a) of the FTC Act, 15 U.S.C. §45(a) by directly causing international long-distance charges to appear on the telephone billing statement of any consumer when such call does not, in fact, go to the international destination for which charges are assessed; and
B. Each defendant is hereby permanently restrained and enjoined, when contracting with any entity for international call charges to appear on any consumer's telephone bill, from failing to include written terms in such contract requiring calls to go to the destination for which charges are assessed on a consumer's telephone bill. If, at the time of the entry of this Order, a defendant has an existing contract with another entity that arranges call charges to appear on any consumer's telephone bill, the defendant may satisfy the requirements of this Section by obtaining from that entity a letter or other written assurance that calls go to the destination for which charges are assessed on a consumer's telephone bill.
IT IS FURTHER ORDERED that:
A. Eligible Consumers charged by AT&T or MCI for telephone calls involving David.exe shall, to the extent possible, receive a credit on their monthly telephone bill equal to the amount of the Relevant Charges. To the extent an Eligible Consumer has already been credited such an amount in full, no additional credit shall be extended. To the extent an Eligible Consumer has received a partial credit, only the remaining balance of the original Relevant Charge shall be credited. The process for issuing the credits to Eligible Consumers will be administered by AT&T and MCI, respectively, and monitored and/or audited by the FTC. The reasonable costs of the two carriers arising from the issuance of credits for the Relevant Charges and from such administration of credits shall be reimbursed by the escrow agent by deducting and paying to AT&T and MCI, respectively, the amounts stated below.
B. Defendants shall establish a Redress Escrow Account at a bank with a branch located in the State of New York, and shall designate Joel Dichter, Esq., as the sole escrow agent and signatory to this Redress Escrow Account. In addition to the funds deposited by the respondents named in the Agreement Containing Consent Order in the matter of Beylen Telecom, Ltd. , NiteLine Media, Inc., and Ron Tan (hereinafter "the Respondents") File No. 972-3128, before the Federal Trade Commission, Defendants A shall deposit sufficient funds into the Redress Escrow Account as are necessary to enable the escrow agent to distribute the funds, consisting of a total deposit of all sums provided by Section IIIB(1) and (2), below, contemporaneously with a deposit of the $60,000 provided by Section IIIB(3), in the following manner:
1. AT&T shall be distributed the sum of $660,000 toward the cost of administering the credit to consumers provided by Section IIIA, above, and toward reimbursement of out-of-pocket expenses associated with calls to the Moldova telephone numbers;
2. MCI shall be distributed the sum of $99,302.57 toward the cost of administering the credit to consumers provided by Section IIIA above and toward reimbursement of out-of-pocket expenses associated with calls to the Moldova telephone numbers;
3. Forty Thousand Dollars ($40,000.00) shall be distributed to the Federal Trade Commission and shall be used, where practicable, to provide redress to Eligible Consumers charged by an international long-distance carrier other than AT&T or MCI (hereinafter referred to as "Eligible Non-AT&T/MCI Consumers.") The Commission, in its sole discretion, may use a designated agent to administer redress for Eligible Non-AT&T/MCI Consumers. If the Commission, in its sole discretion, determines that redress to consumers is wholly or partially impractical, any funds up to Forty Thousand Dollars ($40,000.00) not so used shall be paid to the United States Treasury. Defendants A shall be notified as to how such funds are disbursed, but shall have no right to contest the manner of distribution. Eligible Non-AT&T/MCI Consumers shall have 90 days from the entry of this Order to request a refund. If the Commission or its designated agent determine within 120 days from the entry of this Order that the cost of issuing and administering refunds to Eligible Non-AT&T/MCI Consumers exceeds Forty Thousand Dollars ($40,000.00), the Commission or its designated agent shall so notify the escrow agent and Defendants A, and an additional sum of money not to exceed Twenty Thousand Dollars ($20,000.00) shall be distributed by the escrow agent to the Commission for redress to Eligible Non-AT&T/MCI Consumers. To the extent that the escrow agent is not notified in writing by the Commission within such 120 day period that all or a portion of the additional Twenty Thousand Dollars ($20,000.00) is required by the Commission for redress purposes, the $20,000.00 or remaining portion thereof not required by the Commission for redress purposes shall be released from the Redress Escrow Account and distributed promptly by the escrow agent to Defendants A and the Respondents.
IT IS FURTHER ORDERED that, immediately after the receipt of sufficient monies to fund the Redress Escrow Account as provided in Section IIIB above, the escrow account established pursuant to Section II of the Stipulated Preliminary Injunction (the "SPI Escrow"), account # 035-86449-16 (Joel Dichter, Esq., escrow agent) at Sterling National Bank & Trust Co., 425 Park Avenue, New York, NY 10022, shall be dissolved. All of the funds in the SPI Escrow shall be distributed back to defendant William Gannon.
IT IS FURTHER ORDERED that for a period of three years after the date of entry of this Order each defendant is hereby restrained and enjoined from failing to maintain, and make available to the FTC upon reasonable notice, documents that, in reasonable detail, accurately, fairly, and completely reflect such defendant's activities related to using the Internet to place international long distance telephone calls, including:
A. 1. Representative written and, if distributed in audio format, audiotaped copies of all solicitations, advertisements, or other marketing materials actually used;
2. The number, frequency, and average duration of calls to any international, tolled telephone numbers advertised or promoted directly or indirectly by such defendant, as well as the payments received and payments made for such calls;
3. The portion of the contract or other written assurance referenced in Section IIB of this Order; and,
B. Records that reflect, for every consumer complaint or refund request received from any consumer to whom such defendant has sold, billed, or sent any goods or services, or from whom such defendant accepted money for such goods or services, whether received directly or indirectly or through any third party:
1. the consumer's name, address, telephone number and the dollar amount paid by the consumer;
2. the written complaint or refund request, if any, and the date of the complaint or refund request;
3. the basis of the complaint and the nature and result of any investigation conducted concerning the validity of the complaint;
4. each response from the defendant(s) and the date of the response;
5. any final resolution and the date of the resolution; and
6. in the event of a denial of a refund request, the reason for such denial.
IT IS FURTHER ORDERED that, to enable the Commission to monitor compliance with the provisions of this Order, for a period of three years after the date of entry of this Order:
A. Each corporate defendant shall notify the FTC in writing, within thirty (30) days of: (1) any reorganization, name change, dissolution or change in majority ownership of such defendant; and (2) any affiliation with any new business entity (including but not limited to, any partnership, limited partnership, joint venture, sole proprietorship or corporation) in connection with using the Internet to place international long distance telephone calls, such notification to include: (a) the name of the business entity; (b) the address and telephone number of the business entity; (c) the names of the business entity's officers, directors, principals and managers; and (d) a summary description of the business entity's intended activities; and,
B. Each individual defendant shall notify the FTC in writing, within thirty (30) days of the discontinuance of his current business affiliation or employment with a corporate defendant, or of his affiliation or employment with any new business entity (including but not limited to, any partnership, limited partnership, joint venture, sole proprietorship or corporation) in connection with using the Internet to place international long distance telephone calls, in the latter case such notification to include: (a) the name of the business entity; (b) the address and telephone number of the business entity; (c) the names of the business entity's officers, directors, principals and managers; and (d) a summary description of the business entity's intended activities; and
C. Each defendant shall designate its counsel as authorized to accept service of all documents related to this Order.
IT IS FURTHER ORDERED that each defendant is hereby permanently restrained and enjoined from providing or distributing to any person, except for a court, counsel for defendants, counsel's consultants, agents of the Commission or other law enforcement authorities, or others as ordered by a court of competent jurisdiction, copies of "David.exe" or "david7.exe" or any substantially similar software.
IT IS FURTHER ORDERED that, for a period of three years after the date of entry of this Order, each defendant shall in connection with any business using the Internet to place international long distance telephone calls:
A. Provide a copy of this Order once to, and obtain a signed and dated acknowledgment of receipt of the same from, each affiliate, subsidiary, division, sales entity, successor, officer, director, shareholder, employee, agent or representative of such defendant; and
B. Maintain, and upon reasonable notice make available to representatives of the Commission, the original and dated acknowledgments of the receipts of copies of this Order required by Section VIIIA above.
IT IS FURTHER ORDERED that each defendant shall, within 180 days after the date of entry to this Order, file with the Commission a report, in writing, setting forth the manner and form of compliance with this Order.
IT IS FURTHER ORDERED that where required by this Order, written notice to:
A. The plaintiff shall be effected by serving papers on the Commission, by personal delivery or certified mail, addressed to: Associate Director, Federal Trade Commission, Division of Marketing Practices, Sixth Street and Pennsylvania Avenue, N.W., Room 238, Washington, DC 20580; and
B. Defendants A shall be effected by serving papers, by personal delivery or certified mail, addressed to: Peggy A. Miller, Esq. and Peter Vigeland, Esq., LeBoeuf, Lamb, Greene & MacRae, L.L.P., 125 West 55th Street, New York, NY 10019-5389; and
C. Defendant B shall be effected by serving papers, by personal delivery or certified mail, addressed to: Joel R. Dichter, Esq., Klein, Zelman, Rothermel & Dichter, L.L.P., 485 Madison Avenue, New York, NY 10022.
IT IS FURTHER ORDERED that upon effect of this Order, the Stipulated Preliminary Injunction issued by this Court in this action shall be superseded and replaced by this Order and the terms of the Stipulated Preliminary Injunction shall have no further force or effect.
IT IS FURTHER ORDERED that, to the extent that this Order may conflict with any federal law or regulation which is later enacted or amended, such law and not this Order shall apply where such a conflict exists. For the purposes of this Order, a conflict exists if the conduct prohibited by this Order is required by such federal law or if conduct required by this Order is prohibited by such federal law. This Court shall retain jurisdiction of this matter for the purposes of construction and enforcement of this Order.
The Commission through its counsel, and the defendants and their respective counsel, hereby stipulate and agree to the entry of the foregoing Consent Decree and Order.
For the Plaintiff:
For the Defendants:
SO ORDERED, this ______ of _____, 19__, at _________ o'clock ___.m.
List of Moldova Phone Numbers