File Sharing Operator Settles FTC Charges

An operator who deceptively claimed that membership in his Web site would allow users of peer-to-peer (P2P) file-sharing programs to transfer copyrighted materials without violating the law has agreed to settle FTC charges that his claims were false. The settlement bars misrepresentations about P2P file-sharing products or services, requires that the operator disclose the civil and criminal liability risks of downloading copyrighted material without the owner’s permission, and requires that the operator refund more than $15,000 to the customers he duped into buying memberships.

In September 2005, the FTC filed suit in federal court charging that Cashier Myricks used his mp3downloadcity.com Web site to market and sell a tutorial and referral service that promoted the use of P2P file-sharing software programs to download digital music, movies, and computer games. Unlike a licensed subscription service, the defendant’s service did not provide its paying customers with a license to download and share copyrighted music, movies, or games. Instead, for $24.95, the defendant instructed consumers on the use of free P2P file-sharing software provided by others. According to the FTC’s complaint, consumers were lured to become members by deceptive claims that subscribing to the defendant’s service made P2P file sharing “100% legal.”

According to the FTC complaint, the defendant’s customers who used P2P file-sharing programs to download copyrighted material, or who made it available to others, without the copyright owner’s permission, were engaged in copyright infringement that could subject them to civil and criminal liability. The court ordered a temporary halt to the deceptive claims. The settlement announced today ends the litigation.

The settlement bars misrepresentations in connection with the sale, advertising or use of any P2P file-sharing program tutorial or referral service or computer software program. It bars misrepresentations about the legality or any computer product or material, including any P2P program. It also bars any misrepresentations in advertising, marketing, promoting or sale of any good or service. The settlement provides that the defendant refund $15,240 to the 611 customers who signed up for the service.

In addition, the settlement requires that the defendant notify customers that the claims that his file sharing services were “100% legal” were false and to inform them that “Using P2P programs to download copyrighted music, movies, games, or other material without a license from the copyright holder can subject you to lawsuits, fines, and even criminal prosecution.” The settlement also contains record keeping requirements to allow the FTC to monitor compliance.

The FTC has published a consumer alert, “P2P File Sharing: Evaluating the Risks,” that is available at: http://www.ftc.gov/bcp/edu/pubs/consumer/alerts/alt128.shtm.

The Commission wishes to acknowledge the assistance of The Center for Democracy and Technology in this matter.

The Commission vote to accept the stipulated final judgment and order was 5-0. It was filed in U.S. District Court for the Central District of California Western Division in Los Angeles.

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 legal documents associated with these cases 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 thousands of civil and criminal law enforcement agencies in the U.S. and abroad.

(Civil Action No. CV-05-7013 CAS (FMOx)