FTC Charges Web Site Billing Service with Contempt

The Federal Trade Commission has filed suit in U.S. District Court charging Mercury Marketing of Delaware, now doing business as GoInternet.net, and its principal Neal D. Saferstein with contempt of court. The agency alleges that Saferstein and Mercury continue to bill consumers for Internet-related services without consumers’ authorization in violation of federal law and a previous FTC Order. The FTC has asked the court for a hearing and for a temporary order to halt the illegal billing practices and to freeze the corporation’s assets to preserve them for consumer redress, pending a ruling on the contempt charges.

On June 28, 2000, the FTC filed its complaint in U.S. District Court for the Eastern District of Pennsylvania alleging that Mercury and Saferstein misrepresented that consumers were legally obligated to pay for the defendants’ Internet-related services. The complaint alleged that Mercury’s telemarketers cold-called small businesses nationwide offering to create a Web page, or advertisement on the Internet, for consumers and then billed them without their authorization. “In numerous instances, consumers who are billed for the defendants’ Internet-related services do not remember receiving the defendants’ telephone calls,” the complaint says. In other instances, the defendants allegedly billed consumers who said they declined to buy the services or agreed only to receive additional free information. According to the FTC, the defendants never asked consumers for credit card or other payment information, but later charged consumers on their telephone bills.

The defendants and the FTC agreed to a consent order, entered by the court on March 1, 2001. The settlement prohibits Mercury and Saferstein from misleading consumers and requires the defendants to reveal all material terms of the sales transaction prior to charging consumers. It also requires the defendants to obtain express, verifiable agreement to the terms of any sale they make and requires that the terms of any recorded portion of the sales call to be consistent with the terms of any non-recorded portion. In addition, it requires defendants to notify consumers they are billing that they can cancel and requires the defendants to provide refunds to those who did not authorize Mercury to bill them.

In legal papers filed in U.S. District Court on July 30, 2003, the FTC alleges that the defendants “have engaged in precisely the same deceptive and misleading practices that led to the FTC’s original action – billing consumers for their Web services without the consumer’s authorization.” The agency notes that as the result of increasing consumer complaints, the FTC reviewed Mercury’s business records, subpoenaed third parties, interviewed consumers, and surveyed Mercury’s customers to monitor compliance with its order. Despite the 2001 Order barring the illegal activities, the “conduct has not only continued, it has worsened,” the FTC told the court. “Simply put, defendants violate the existing order by billing consumers who they have misled.”

A survey of 417 random consumers pulled from a list Mercury provided to the FTC of its “current customers” found that:

• Less than one percent of Mercury’s customers (one person) indicated that they had agreed to hire Mercury to develop and maintain a Web page for their businesses.

• None of Mercury’s customers indicated that Mercury had provided services for their businesses.

• Most (72 percent) of Mercury’s customers were unaware that a charge of $29.95 had been appearing on their monthly telephone bills.

• Nearly 30 percent of Mercury’s customers claimed they attempted to obtain a refund.

According to the FTC, recent complaints and company billing records show defendants even bill consumers who have asked to be placed on the company’s Do Not Call lists. The FTC said the record demonstrates that “the defendants are engaged in a systematic and widespread effort to defraud consumers.”

Mercury also operates and bills consumers under the names Mercury Internet Services, Mercury Communications, Mercury, MIS, Mercury Internet Services Wireless, Venus Voice Mail, and/or Mercury Technologies. Using the name Venus Voice Mail, the defendants allegedly target residential telephone line subscribers.

If the court finds the defendants in contempt, the FTC will ask the court to order consumer redress and to permanently bar the illegal activities.

The original complaint, consent, and recent contempt action were filed in the U.S. District Court for the Eastern District of Pennsylvania.

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 order to show cause why defendants should not be found in contempt 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, 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.

(Civil Action No. 00-CV-3281)