Deceptive Internet Access Fee Operator Settles FTC Charges

An Internet operation that conned consumers into paying membership fees and turning over sensitive personal and financial information by deceptively claiming it would pay for their Internet access has agreed to settle Federal Trade Commission charges that the operation violated federal law. The settlement bars the defendants from making misrepresentations in the advertising, promotion, or sale of any products or services, bar them from collecting or disclosing personal information obtained by misrepresentations, and require that within 30 days, they delete or destroy the personal identifying information that they collected from consumers.

On May 23, 2001, the FTC filed suit in U.S. District Court naming as defendants New Millennium Concepts, Inc., doing business as rhinoPoint, and their principal, Karl V. Kay. Kay and the businesses are based in the Chicago suburb of Hoffman Estates.

The FTC alleged that the defendants operated a Web site where they offered to pay Internet access fees for consumers who became part of their "network" and paid a one-time "set-up" fee ranging from $10 to $16. To join the network, consumers completed a questionnaire detailing personal information and agreed to complete monthly marketing surveys. Consumers who signed up were required to complete "member profile forms" that asked for such information as credit card numbers and income level. The Web site claimed it marketed "group data response to companies that provide us survey questions for our members." The site's privacy policy stated, "We do not sell or provide individual names, addresses, phone numbers, credit information or other personal contact information data to outside parties under any circumstances."

On June 1, 2001, the Court entered a stipulated preliminary injunction order that prohibited misrepresentations, froze the defendants' assets, and barred the use of the consumer data, pending trial. The settlement announced today concludes that litigation.

The settlement bars the defendants from making misrepresentations in the advertising, promotion, or sale of any products or services. Specifically, it bars them from misrepresenting:

• That consumers who sign up as members and complete monthly marketing surveys will be reimbursed for Internet access charges;
• The availability or basis of any reimbursement, refund, or rebate promotion or program; and
• The terms, restrictions, costs, or conditions in the promoting or offering of any product or service, including, but not limited to, the promoting or offering of products on the Internet.

It also bars the defendants from collecting, using, selling, renting, leasing, transferring, or otherwise disclosing any personal identifying information obtained by misrepresentations. The settlement requires that within 30 days, the defendants delete or destroy all the personal identifying information they collected from consumers at their rhinoPoint Web site.

Based on financial documents provided by the defendants, no consumer redress has been ordered. If the financial information proves inaccurate, the Court will order a judgment against Karl Kay in the amount of $481,172.05 -- the amount of consumer injury in this matter. Finally, the settlement contains record-keeping requirements to allow the Commission to monitor the defendants' compliance with its order.

The Commission vote to approve the stipulated final judgment and order for permanent injunction was 5-0. The case was filed in U. S. District Court in the Northern District of Illinois in Chicago.

NOTE:   A stipulated permanent injunction is for settlement purposes only and does 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 stipulated final judgment and other documents releated to this case 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.

(FTC File No. X01 0045)
(Civil Action No. 01 C 3797)