David M. Torok
Federal Trade Commission
600 Pennsylvania Avenue, N.W., Room 238
Washington, D.C. 20580
Attorneys for Plaintiff Federal Trade Commission
STATES DISTRICT COURT
FEDERAL TRADE COMMISSION, Plaintiff,
VERITY INTERNATIONAL, LTD., an Irish business entity; INTEGRETEL, INC., a California corporation; EBILLIT, INC., a subsidiary of Integretel, Inc.; and ROBERT GREEN and MARILYN SHEIN, individually and as owners of Verity International, Ltd., Defendants.
Plaintiff Federal Trade Commission ("FTC" or "the Commission"), for its complaint alleges:
1. The Federal Trade Commission brings this action under Section 13(b) of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. § 53(b), to secure a permanent injunction, preliminary injunctive relief, rescission of contracts, restitution, disgorgement, and other equitable relief for defendants' unfair or deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).
JURISDICTION AND VENUE
2. This Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 1331, 1337(a), and 1345, and 15 U.S.C. § 53(b).
3. Venue in the United States District Court for the Southern District of New York is proper under 28 U.S.C. §§ 1391(b)-(d), and 15 U.S.C. § 53(b).
4. Plaintiff, the Federal Trade Commission, is an independent agency of the United States Government created by statute. 15 U.S.C. §§ 41 et seq. The Commission is charged, inter alia, with enforcement of 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, by its own attorneys, to enjoin violations of the FTC Act in order to secure such equitable relief as may be appropriate in each case. 15 U.S.C. § 53(b).
5. Defendant Verity International, Ltd. ("Verity") is an Irish corporation or limited partnership with a business address of 27-29 Pembroke Street, Dublin, Ireland. Defendant Verity transacts or has transacted business in the Southern District of New York.
6. Defendant Integretel, Inc. ("Integretel"), is a California corporation with its office and principal place of business located at 5883 Rue Ferrari, San Jose, California. Defendant Integretel transacts or has transacted business in the Southern District of New York.
7. Defendant eBillit, Inc. ("eBillit"), is a subsidiary of defendant Integretel, with its office and principal place of business located at 5883 Rue Ferrari, San Jose, California. Defendant eBillit, Inc. transacts or has transacted business in the Southern District of New York.
8. Defendant Robert Green, a citizen of the United Kingdom, is a partial owner of defendant Verity. 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 of defendant Verity set forth in this complaint. Defendant Green transacts or has transacted business in the Southern District of New York.
9. Defendant Marilyn Shein, a citizen of the United Kingdom, is a partial owner of defendant Verity. At all times material to this complaint, acting alone or in concert with others, she has formulated, directed, controlled, or participated in the acts and practices of defendant Verity set forth in this complaint. Defendant Shein transacts or has transacted business in the Southern District of New York.
10. At all times material to this complaint, the defendants' course of business, including the acts and practices alleged herein, has been in or affecting commerce, as "commerce" is defined in Section 4 of the FTC Act, 15 U.S.C. § 44.
11. For the purposes of this Complaint, the following definitions shall apply:
DEFENDANTS' BUSINESS PRACTICES
12. Verity provides a billing system to service vendors that permits the vendors to charge consumers who access the vendors' Internet web sites on a per-minute basis through the use of long distance telephone charges. This billing system is touted as a alternative method of payment for consumers who do not wish to place such charges on their credit cards.
13. To use the Verity billing system, consumers must download on their computers a dialing program offered through the service vendors' web sites. These sites generally require consumers to scroll through a disclosure screen and click on a box stating that the consumer has read the disclosure and agrees to its terms.
14. After clicking the "accept" box, the Verity dialing program is downloaded onto the consumer's computer. The program disconnects the consumer's modem from the consumer's normal Internet Service Provider ("ISP") and reconnects the consumer's modem to the Internet through an international telephone connection, purportedly terminating in Madagascar. The consumer may then access the service vendor's web site. The consumer is charged $3.99 for each minute he is connected to the Internet via the international telephone connection.
15. When a consumer uses the Verity dialing program to access a vendor's web site, a system known as Automatic Number Identification ("ANI") is used to capture the telephone number from which the call is being placed, and to identify the line subscriber associated with that number. Defendants send the line subscriber the bill for the call, regardless of whether the line subscriber actually placed the call and accessed the web site, or authorized anyone else to place the call and access the web site.
16. No later than September 2000, Verity began to use the services of defendant Integretel to mail bills directly to the telephone line subscribers whose telephone lines purportedly were used to access vendor's web sites through Verity's dialing program. The bill Integretel sends consumers lists Verity's name at the top, includes a Post Office Box number to which consumers are instructed to return their payments, and lists a toll-free number for consumers to call if they have any questions about the bill. The bill includes a statement that charges are for "international calls, from your modem to a Madagascar number, for website access." The second page of the bill lists each call purportedly made using the Verity dialing program. Each call is listed as terminating in Madagascar, and, as noted above, is billed at a rate of $3.99 per minute.
17. Integretel, acting on Verity's behalf and through its newly-created subsidiary eBillit, is responsible for collecting the consumer payments sent to the Post Office Box listed on the Verity bill. Integretel also is responsible for answering the toll-free "customer service" number included on the bill.
18. Many line subscribers who have received the defendants' bills do not know what they are being billed for. In many instances, neither the line subscriber nor anyone in the line subscriber's household has ever called a telephone number in Madagascar, has ever used their computer modem to make such a call, or has ever authorized any person to do so. In other instances, the line subscriber has discovered that a minor in the line subscribers' household, or another who does not have the line subscriber's authorization, has accessed vendor's web sites using the Verity dialing program.
19. In numerous instances, line subscribers who have called the toll-free number to inquire about the charges that appear on the bills sent by Integretel find it virtually impossible to reach an Integretel representative. Consumers report calling numerous times throughout a number of days, only to reach a busy signal. Those consumers who are able to speak with an Integretel representative have experienced accusatory and unyielding treatment in response to their attempts to dispute the charges and explain why the billing is in error. Integretel representatives have told consumers that, regardless of the explanation, a line subscriber is responsible for the charges made over their telephone lines.
20. In numerous instances, calls placed through the Verity dialing program are not actually directed to Madagascar, but are directed to other foreign termination points that have comparatively much lower long distance rates for calls from the United States.
VIOLATIONS OF SECTION 5 OF THE FTC ACT
21. Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), prohibits unfair or deceptive acts or practices in or affecting commerce.
22. In numerous instances, defendants represent, expressly or by implication, that because a line subscriber's telephone was used to access Internet web sites through the line subscribers' computer modem using the defendants' dialing program, the line subscriber is legally obligated to pay defendants for that access, whether or not the line subscriber actually accessed such web sites.
23. In truth and in fact, in numerous instances, the line subscriber is not legally obligated to pay defendants for accessing Internet web sites through the defendants' dialing program.
24. Therefore, the representation set forth in paragraph 22 is false and deceptive and violates Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).
25. In numerous instances, defendants bill or cause to be billed, and attempt to collect or arrange for the collection of payment from, a line subscriber whose telephone may have been used to call an international telephone number through the line subscriber's modem, using the defendants' dialing program in order to access an Internet web site, but who did not themselves access such site or use the defendants' dialing program, or authorize anyone else to do so.
26. Line subscribers cannot reasonably block telephone calls to international numbers. Therefore, line subscribers cannot reasonably avoid defendants' billing and collection efforts for international telephone calls made through the defendants' dialing program by others while using those line subscribers' computers modems and telephone lines.
27. Defendants' practice of billing and attempting to collect from line subscribers whose computer modems and telephone lines were used to access Internet web sites using the defendants' dialing program, but who themselves have not accessed such web sites or used the defendants' dialing program, causes substantial injury to the line subscribers that is not outweighed by countervailing benefits to consumers or competition.
28. Therefore, defendants' practice, as alleged in paragraph 27, is unfair and violates Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).
29. In numerous instances, defendants directly or through an intermediary cause charges for long distance calls to Madagascar, at a rate of $3.99 per minute, to appear on billing statements of line subscribers whose computer modems and telephone lines were purportedly used to access Internet web sites.
30. In truth and in fact, the calls that the line subscribers' modem dials when using the defendants' international dialing program do not terminate in Madagascar, but instead terminate in other foreign countries that have comparatively much lower long distance rates for calls from the United States.
31. Therefore, the defendants' practice of causing charges for long distance calls to Madagascar to appear on the billing statements of line subscribers whose computer modems were purportedly used to access Internet web sites, as set forth in paragraph 29 above, is deceptive, in violation of Section 5 of the FTC Act, 15 U.S.C. § 45.
CONSUMER INJURY AND UNJUST ENRICHMENT
32. Consumers throughout the United States have suffered and continue to suffer 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 acts or practices. Absent injunctive relief by this Court, defendants are likely to continue to injure consumers, reap unjust enrichment, 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 this Court to grant injunctive and other ancillary relief, including consumer redress, disgorgement and restitution to prevent and remedy any violations of any provision of law enforced by the Federal Trade Commission.
34. This Court, in the exercise of its equitable jurisdiction, may award other relief to prevent or remedy injury or to prevent unjust enrichment resulting from the defendants' law violations.
PRAYER FOR RELIEF
WHEREFORE, plaintiff requests that this Court, as authorized by Sections 13(b) of the FTC Act, 15 U.S.C. § 53(b), and pursuant to its own equitable powers: