Alyon Technologies Settles FTC Charges

Alyon Technologies, Inc. will drop its claim to approximately $17 million in consumer bills to settle Federal Trade Commission charges that it engaged in unauthorized billing and collection for adult videotext services supposedly accessed on the Internet by hundreds of thousands of consumers. Another $22 million in bills may be forgiven if consumers challenge their charges. The settlement provides that consumers who were billed for adult services used on or before June 15, 2003, and who disputed the charges to the defendants on or before January 15, 2004, will be credited. Consumers who were billed for services used on or before June 15, 2003, but who did not pay or dispute the charges, will have the opportunity to dispute the charges in writing and qualify to have the debt forgiven. The defendants may continue to bill those consumers. On the first bill sent to these consumers in the future, however, the defendants must disclose the rights consumers have to dispute these bills. Those rights are set out in http://www.ftc.gov/os/2004/12/alyonexhf.pdf. Consumers who believe these bills were not authorized must complete the appropriate affidavit, sworn to under penalty of perjury, and return it to the defendants within 45 days after they receive the bill. The settlement also bars Alyon from billing consumers without first giving them notice of all material terms and conditions of the offer and getting their express, verifiable authorization to receive and be billed for the videotext services. It requires that Alyon monitor the practices of its videotext service providers to assure they comply with those conditions and disclosures.

In May 2003, the FTC charged Alyon and its principal, Stephane Touboul, with illegally billing and collecting for videotext services purportedly accessed on the Internet. Over time, 16 state attorneys general filed similar charges against Alyon in state courts. According to the FTC, the defendants downloaded a modem-dialing program onto consumers’ computers, allegedly after consumers clicked on a button to agree to the terms and conditions for such a download. The dialing program then disconnected consumers from their own Internet service providers and reconnected them to the defendants’ network. The defendants captured the telephone number used by the modem and matched it against databases of line subscriber information. The line subscribers identified as responsible for the captured telephone numbers later received bills charging them $4.99 a minute for each minute the defendants claimed videotext services were purchased, regardless of whether the line subscribers authorized the purchase. The FTC alleged that many consumers never visited the defendants’ sites at all, and were charged due to billing service errors of which the defendants were aware. Other line subscribers were billed because a minor child or someone else in their household accessed the services without the line subscriber’s authorization. The FTC also alleged the defendants’ dialing program at times downloaded onto consumers’ computers without their authorization. It also alleged that the defendants failed to follow provisions of the Pay-Per-Call Rule that provide a mechanism for consumers to dispute charges for “telephone-billed purchases.” The FTC asked the court to halt the illegal practices and provide for consumer redress. The settlement announced today ends the litigation against defendants Alyon and Touboul.

The settlement bars Alyon from representing that a consumer who is being billed owes money unless the consumer is an adult; the consumer received clear and conspicuous notice of all material terms and conditions of the offer to access videotext services; and the consumer provided express, verifiable authorization to receive and be billed for the videotext services. It requires Alyon to monitor the practices of its videotext service providers to assure that they comply with those conditions and disclosures. The settlement bars Alyon, and any videotext service providers with which it does business, from blocking consumers’ ability to read the terms and conditions of service; plant spyware, viruses, or other unnecessary software on consumers’ computers; block consumers’ ability to remove a dialer program or disconnect from the videotext service; fail to disclose how billing charges are calculated; or download modem-dialer software without consumers’ authorization. The settlement also bars the defendants from violating the Pay-Per-Call Rule.

Consumers billed by the defendants for videotext services used on or before June 15, 2003, who disputed the bills to the defendants before January 15, 2004, and did not pay them, will receive credits for the full amount of the bill. Consumers billed for services used on or before June 15, 2003, who neither paid nor disputed the bills, will be given the opportunity to dispute them and, where appropriate, receive a credit. Based on financial statements submitted by the defendants, the order will not require the defendants to refund any money previously collected from consumers. Should the court find that the defendants misrepresented their financial condition, the issue of refunds for those who have previously been billed, and who have paid those bills, will be reopened. The settlement requires that any bills sent after the settlement was entered by the court must clearly disclose a “Billing Rights Summary” for consumers disputing their bills. The settlement contains certain recordkeeping and other provisions to allow the agency to monitor compliance with its order

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 complaint and stipulated final judgment and order 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.

(Civil Action No. 1:03-CV-1297-RWS)