FTC Halts Deceptive Free Software CD Internet Scam

At the request of the Federal Trade Commission, a United States Magistrate Judge has temporarily halted the marketing practices of an operation that deceptively advertised “free software CDs” but billed consumers’ credit cards for them without the consumers’ authorization. The agency asked the court to bar the deceptive advertising and order redress for tens of thousands of consumers who were wrongfully billed.

According to the FTC, the scheme worked like this: the defendants’ Web site offered consumers a free CD containing computer software if they agreed to pay a shipping and handling fee of $1.99 to $2.99. Consumers who signed up for the free CD were then offered three more free software CDs for no additional shipping or handling fees. The consumers provided their names and addresses and a credit or debit card number online. Before they completed the transaction, they checked a box saying they agreed to the “terms of use.” The “terms of use” detailed computer software licensing arrangements and usage rules, and many consumers checked the box without clicking on the hyperlink or without reading the entire form. But buried in the seventh paragraph of the fourteen-paragraph, single-spaced document is language that contradicts the free software claim. It states that consumers must send back two of the four “free” CDs within 10 days or they will be charged a fee of $39 or $49. It also states that consumers will be enrolled in a software continuity program, will receive CDs they didn’t order in the future, and will be charged $39 to $49 for those CDs unless they return them within 10 days.

The FTC alleged in its complaint that most consumers did not know about the charges or continuity plan until they were billed. According to the agency, because the defendants did not adequately notify consumers, they could not avoid the charges.

The FTC charged the defendants with unfair and deceptive practices that violate the FTC Act. The agency charged them with violating the Unordered Merchandise Statute which prohibits billing recipients for merchandise they did not order. The FTC asked the court to order a halt to the unfair and deceptive practices and to order the defendants to give up their ill-gotten gains.

The Commission Complaint names Think All Publishing, L.L.C., and its principal, Yuri Mintskovsky.

The Commission vote to file the complaint was 5-0. It was filed in the U.S. District Court for the Eastern District of Texas, Sherman Division on January 9, 2007. On January 10, 2007, the court issued a Temporary Restraining Order enjoining the illegal activities of defendants Think All Publishing, L.L.C. and Yuri Mintskovsky and freezing their assets. After a contested Preliminary Injunction Hearing, on January 19, 2007, the Magistrate Judge filed his recommendation to the District Court Judge that a Preliminary Injunction with Asset Freeze be issued against the defendants. The Magistrate Judge’s recommendation is now pending before the District Court Judge.

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. 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, 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/ftc/complaint.htm. 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.

(FTC File No. 062 3012)
(Civil Action No. 4:07 CV 11)