Analysis of Proposed Consent Order
to Aid Public Comment

The Federal Trade Commission has accepted, subject to final approval, an agreement containing a consent order from Beylen Telecom, Inc. ("Beylen"), NiteLine Media, Inc. ("NiteLine"), and Ron Tan ("Tan"). NiteLine and Tan have solicited consumers to download viewer software over the Internet in order to view computer images. Beylen has provided telecommunications and other services to NiteLine and other "audiotext" entities that use telephone calls to provide information to, and collect money from, consumers.

The proposed consent order has been placed on the public record for sixty (60) days for reception of comments by interested persons. Comments received during this period will become part of the public record. After sixty (60) days, the Commission will again review the agreement and the comments received and will decide whether it should withdraw from the agreement or make final the agreement's proposed order.

This matter concerns allegations about the manner in which respondents solicited and billed consumers to use a software program to view adult images on the Internet. The Commission has issued a proposed draft complaint that sets forth the allegations to be resolved by the proposed administrative consent order. The draft complaint closely parallels the Commission’s federal court complaint and amended complaint filed in FTC v. Audiotex Connection, Inc. CV-97 0726 (DRH) (E.D.N.Y. filed Feb. 13, 1997) against defendants allegedly engaged activities similar or related to those of the respondents.

The proposed draft complaint challenges three practices of the respondents. First, the draft complaint alleges that respondents NiteLine and Tan misrepresented that consumers could view adult images at no cost if consumers downloaded and used the respondents’ purported "viewer" software. Second, the draft complaint alleges that respondents NiteLine and Tan failed to disclose or adequately disclose material aspects of the "viewer" program, including that the program would shut off a consumer’s modem speakers, cut off the consumer’s modem connection to his local Internet service provider, and automatically place an international telephone call from the consumer’s modem to a remote Internet site. The draft complaint alleges that Beylen violated the law by providing the "means and instrumentalities" to carry out the two types of practices just described. Finally, the draft complaint alleges that respondents Beylen, NiteLine, and Tan caused consumers to receive deceptive telephone bills for calls that purportedly went to Moldova in Eastern Europe, when they actually only went to Canada.

The proposed administrative consent order, published for comment with this notice, again closely parallels the consent order proposed in FTC v. Audiotex Connection, Inc. CV- 97 0726 (DRH) (E.D.N.Y.). The proposed administrative consent order contains prohibitions designed to prevent respondents from engaging in similar acts and practices in the future. The proposed administrative consent order also contains monetary provisions designed to redress injury to consumers.

Sections I and IIA of the proposed order prohibit respondents from engaging in the types of activity alleged in the draft complaint. Part IIB of the proposed order requires the respondents to obtain written or contractual assurances from third parties that calls will go to the destination for which charges are assessed on a consumer’s telephone bill.

Section III requires the respondents to contribute to a redress fund established pursuant to the consent order proposed in FTC v. Audiotex Connection, Inc. CV-97 0726 (DRH) (E.D.N.Y.). Money from this fund is to be paid to long-distance carriers so that they can issue credits to consumers through their telephone bills. A portion of the redress fund also is be paid to the FTC so that the Commission or its agent can refund some consumers directly.

Sections IV, VI, and VIII require the respondents to maintain copies of business records related to using the Internet to place international long-distance telephone calls; to provide copies of the order to certain of the company’s personnel; to notify the Commission of any change in employment or corporate structure that might affect compliance with the order; and to file compliance reports with the Commission. Section VII forbids the defendants from distributing any version of their "viewer" program to third parties.

The proposed administrative consent order does not contain a “sunset” provision that would terminate the order twenty years after it is issued or after a complaint is filed in federal court.

The purpose of this analysis is to facilitate public comment on the proposed order. It is not intended to constitute an official interpretation of the agreement and proposed order or to modify in any way their terms.