FTC Fines Several Adult Affiliate Programs

In a crackdown on operations that illegally expose unwitting consumers to graphic sexual content, the Federal Trade Commission has charged seven companies with violating federal laws requiring warning labels on e-mail that contains sexually-explicit content. U.S. District Court suits filed against three operations seek civil penalties and a permanent bar on the illegal marketing. Settlements with four other operations have imposed $1.159 million in civil penalties. The settlements bar the illegal marketing practices in the future and require that the defendants monitor their affiliates to ensure they are not violating the law.

“This x-rated e-mail is electronic flashing,” said Lydia Parnes, Director of the Bureau of Consumer Protection. “It exposes kids and other unwary consumers to graphic sexual content, and it is unwanted, offensive, and illegal.”

“The Adult Labeling Rule was designed to protect consumers who don’t want to be exposed to random assaults of sexual material and others, like kids, for whom it is inappropriate. It’s the law, and we intend to enforce it,” Parnes said.

The FTC’s Adult Labeling Rule and the CAN-SPAM Act require commercial e-mailers of sexually-explicit material to use the phrase “SEXUALLY EXPLICIT: ” in the subject line of the e-mail message and to ensure that the initially viewable area of the message does not contain graphic sexual images. The Rule and the Act also require that unsolicited commercial e-mail contain an opportunity for consumers to opt out of receiving future e-mail and provide a postal address, among other things. The FTC charged that the companies sent sexually-explicit e-mail messages that:

violated the Adult Labeling Rule requirements;
violated the requirement to provide a clear and conspicuous opt-out mechanism; and
violated the requirement to provide a postal address.
While the defendants did not send e-mail directly to consumers, they operated “affiliate marketing” programs in which they paid others to send spam on their behalf. Under the CAN-SPAM Act, the defendants are liable for the illegal spam sent by their affiliates because the defendants “initiated” the e-mail by paying others to send it on their behalf.

The settlements bar future violations of the CAN-SPAM Act and the Adult Labeling Rule. They also require that the defendants closely monitor the practices of their affiliate marketers to insure that they are not violating the law. BangBros.com Inc., based in Florida, will pay $650,000 in civil penalties; MD Media, a Michigan corporation, will pay $238,743; APC Entertainment, Inc., a Florida corporation, will pay $220,000; and Pure Marketing Solutions, LLC, a Florida company, and Internet Matrix Technology, a corporation based in Louisiana, will together pay $50,000. The settlements contain record-keeping provisions to allow the FTC to monitor the defendants’ compliance with the orders.

In addition to the settlements, at the request of the FTC, the Department of Justice (DOJ) has filed suit in U.S. District Courts citing three other operations for violations of the CAN-SPAM Act and the Adult Labeling Rule: TJ Web Productions, LLC, a Nevada company; Cyberheat, Inc., an Arizona Corporation; and Impulse Media, a Washington corporation.

Microsoft Corporation provided valuable technical assistance in the investigation of these cases.

The Commission votes to file the complaints in the Cyberheat, Impulse Media and TJ Web Productions cases were 5-0. Votes in the other matters were 4-0.

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 actually has violated the law. The case will be decided by the court.

The proposed stipulated final judgments and orders will be filed by the DOJ at the request of the FTC. They are subject to court approval.

NOTE: Stipulated final judgments and orders are for settlement purposes only and do not constitute an admission by the defendant of a law violation. Consent judgments have the force of law when signed by the judge.

Copies of the complaints and consents 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 in English or Spanish (bilingual counselors are available to take complaints), 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.

MEDIA CONTACT:

Claudia Bourne Farrell
Office of Public Affairs
202-326-2181

STAFF CONTACT:

Jonathan M. Kraden
Bureau of Consumer Protection
202-326-3257


(FTC File No. 052-3042 (Cyberheat))
(FTC File No. 052-3043 (APC Entertainment))
(FTC File No. 052-3044 (MD Media))
(FTC File No. 052-3045 (Pure Marketing Solutions))
(FTC File No. 052-3046 (Impulse Media Group))
(FTC File No. 052-3047 (TJ Web Productions))
(FTC File No. 042-3180 (Bang Brothers))

http://www.ftc.gov/opa/2005/07/alrsweep.htm

Crazy stuff, although, you have to admit, thats a nice chuink of change for the FTC ;)

Regards,

Lee