Website Crammers Settle FTC Charges

An operation charged with billing consumers for "free" trial Web sites has agreed to settle Federal Trade Commission charges that their practices were illegal. The settlement will require Mercury Internet Services, and its principal, Neal D. Saferstein, to offer consumers refunds for telephone bill charges they did not authorize. The settlement also prohibits misrepresentations in their telemarketing and requires that they obtain express, verifiable authorization before billing consumers for Web page services.

On June 28, 2000, the FTC filed suit in U.S. District Court for the Eastern District of Pennsylvania alleging that Mercury and Saferstein misrepresented to consumers that they were legally obligated to pay for Web site services the defendants charged to their telephone bills without their authorization. The agency complaint alleged that Mercury ran a telemarketing operation that cold-called consumers nationwide offering to create a Web presence. "In numerous instances, consumers who are billed for Defendants' Internet-related services do not remember receiving defendants' telephone calls," the complaint says. In other instances, consumers who are billed said they declined to buy the services or agreed only to receive additional free information. Consumers were not asked for credit card information, but later found charges added to their telephone bills.

To settle the charges, Mercury and Saferstein will notify all consumers they are billing for a Web site that they are being billed and that they can cancel. Those who cancel because they did not authorize Mercury to bill them will receive refunds. In addition, the settlement bars misrepresentations that consumers are obligated to pay for services they did not authorize; that consumers will not be charged before the end of the "free trial" period; and that consumers will not be charged if they cancel during the "free trial" period. It also bars misrepresentations that consumers' Web pages can be located using major Internet search engines. The settlement requires that the defendants obtain express, verifiable agreement to the terms of any sale they make and prohibits them from billing consumers during the "free trial" period. It also requires that they disclose all material terms and conditions in writing before billing consumers.

The Commission vote to accept the Stipulated Final Judgment and Order was 5-0.

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.

To resolve a suit against another crammer, the FTC has approved a final settlement with the Chapter 7 bankruptcy trustee for International Telemedia Associates, Inc. (ITA). Under the terms of the agreement, the Commission received an allowed claim of $3.5 million in ITA's bankruptcy case. The Commission has received an initial pro rata distribution of $700,000 from ITA's bankruptcy estate, and expects to receive additional distributions.

In July 1998, the FTC filed suit against ITA, Online Consulting Group, and several of the companies' officers, alleging that they were engaged in cramming charges for "audiotext" services -- telephone-based entertainment programs -- onto consumers' telephone bills, in violation of Section 5 of the FTC Act and the FTC's 900-Number Rule. In September 1998, the parties stipulated to a preliminary injunction. By that time, however, both ITA and Online had ceased operations, and ITA's creditors had filed an involuntary Chapter 7 bankruptcy petition against ITA. The settlement with ITA's bankruptcy trustee resolves the Commission's claim for monetary relief against ITA.

The Commission vote to approve the settlement was 5-0.

Copies of the complaints and settlements 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). The FTC enters Internet, telemarketing and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies worldwide.

(FTC File No. (Mercury) X000110)
(FTC File No. (ITA) X980071)