FTC Halts Cross Border Con Artists

A U.S. District Court Judge has ordered a halt to the illegal practices of Canadian operators who deceptively posed as domain name registrars and sent bogus bills to thousands of U.S. small businesses and nonprofit organizations for their annual “WEBSITE ADDRESS LISTING.” Many of the businesses and nonprofits believed they would lose their Web site addresses unless they paid the bill, so they paid. The Federal Trade Commission alleged that in most cases the defendants did not provide domain registration services, did not provide the “search optimization” services it claimed to provide, and bilked small businesses and nonprofits out of millions of dollars.

According to the FTC, since 2004, Toronto-based Internet Listing Service has been sending fake invoices to small businesses and others, listing the existing domain name of the consumer’s Web site or a slight variation on the domain name, such as substituting “.org” for “.com.” The invoice appears to come from the businesses’ existing domain name registrar and contains terms such as “WEBSITE ADDRESS LISTING” and “ANNUAL WEBSITE SEARCH ENGINE LISTING.” The invoice also claims to include a search engine optimization service. Most consumers who receive the “invoices” are led to believe that the defendants are their current domain name registrar and that they must pay them to maintain their registrations of domain names. Other consumers are induced to pay based on defendants’ claims that their “Search Optimization” service will “direct mass traffic” to their sites and that their “proven search engine listing service” will result in “a substantial increase in traffic.”

The FTC’s complaint charged that most consumers who paid the defendants’invoices do not receive any domain name registration services and that the “search optimization” service is ineffective and does not result in increased traffic to the consumers’ Web sites.

The FTC charged that the “invoices” represented that the defendants had a preexisting business relationship with the consumer. The “invoices” also represented that consumers owed money for the continued registration of their Web site names and that the defendants would provide continued registration services for consumers. The defendants also claimed that the “search optimization” service would substantially increase traffic to consumers’ Internet Web sites. The FTC alleged all that of these claims were false and violated federal law.

A federal district court judge in Chicago, Robert M. Dow, Jr., ordered a halt to the deceptive claims and froze the defendants’ assets held in the United States, pending trial. The FTC will seek a permanent halt to the scheme and ask the court to order redress to victimized consumers.

The defendants named in the FTC complaint are Data Business Solutions Inc., also doing business as Internet Listing Service Corp., ILS Corp., ILSCORP.NET, Domain Listing Service Corp., DLS Corp., and DLSCORP.NET, and its principals, Ari Balabanian, Isaac Benlolo and Kirk Mulveney. They are based in suburban Toronto, Canada.

This case was brought with the invaluable assistance of the Toronto Strategic Partnership, Microsoft Corporation, the Internet Corporation for Assigned Names and Numbers (ICANN), and the Better Business Bureau of Chicago and Northern Illinois. Wild West Domains, Inc. also provided assistance in this matter.

The Toronto Strategic Partnership consists of the FTC, the U.S. Postal Inspection Service, Competition Bureau Canada, the Toronto Police Service – Fraud Squad, the Ontario Ministry of Government Services, the Ontario Provincial Police – Anti-Rackets, the Royal Canadian Mounted Police, and the United Kingdom’s Office of Fair Trading.

The Commission vote to file the complaint was 4-0.

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.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

(ils3)
( FTC File No. 0723038)