The owners and operators of www.playgirl.com, www.highsociety.com and scores of other adult Web sites have been charged by the Federal Trade Commission with illegally billing thousands of consumers for services that were advertised as "free," and for billing other consumers who never visited the Web sites at all. The FTC and the New York Attorney General have filed suit in U.S. District Court seeking to halt the illegal billing practices and have asked the Court to freeze the defendants' assets, pending trial, to provide for consumer redress.
New York City-based Crescent Publishing Group, Inc., its owner, Bruce Chew, and principal David Bernstein, are named as defendants in the federal court complaint detailing the charges, along with 64 affiliated corporations that operate the adult entertainment Web sites. According to the complaint, the "Free Tour Web Sites" generated income of $188 million between 1997 and October 1999 -- $141 million of which was generated in the first 10 months of 1999 alone.
According to the complaint, the defendants operate scores of adult entertainment Web sites, promoting them as "free." The "Free Tour Web Sites" claim that consumers' credit card numbers are required solely to prove that the consumers are of legal age to view the adult material, and that the credit cards will not be billed. But thousands of consumers were charged recurring monthly membership fees ranging from $20 to $90, the complaint says. Consumers who tried to dispute the charges were met with a variety of barriers designed by the defendants to thwart their efforts. According to the complaint, the defendants use billing names different than the names of the Web sites, so consumers often had no idea who was billing them or why. Moreover, consumers often had difficulty the contacting defendants to get refunds from information provided to them on their billing statement.
According to the joint FTC/ New York A.G. complaint, the defendants routinely change corporate billing names and merchant banks in an attempt to avoid the fraud detection systems of credit card organizations such as Visa U.S.A. When it realized what the defendants were doing, Visa U.S.A. disqualified them from using its credit card system. The defendants moved their merchant banking relationship to Guatemala, adopted several new merchant names, and continued to process credit card transactions.
The FTC and the New York Attorney General allege that Crescent and its principals have violated the FTC Act and New York state law. They have asked the Court to halt the deceptive and unfair practices, to appoint a receiver to oversee the businesses and to freeze the defendants' assets pending trial to preserve them for consumer redress.
The Commission vote to file the complaint was 5-0.
The complaint was filed August 23, 2000 in the United States District Court for the Southern District of New York.
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; toll free at 877-FTC-HELP (877-382-4357); TDD for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.
Claudia Bourne Farrell,
FTC Office of Public Affairs
Office of the NY Attorney General
(Civil Action No. 00CV6315)
(FTC File No. 002 3001)