UNITED STATES DISTRICT COURT FEDERAL TRADE COMMISSION, Plaintiff, v. INTERNATIONAL TELEMEDIA ASSOCIATES, INC., also doing business as ITA; ARJUNA DIAZ, a/k/a RONALD P. DIAZ, individually and as an officer of International Telemedia Associates, Inc.; GERARD ROBERT ENGLE, individually and as an officer of International Telemedia Associates, Inc.; ONLINE CONSULTING GROUP, INC.; and DAVID PETERSON, JR., individually and as an officer of Online Consulting Group, Inc., Defendants. CIVIL NO. 1:98-CV-1935 COMPLAINT FOR PERMANENT INJUNCTION Plaintiff, the Federal Trade Commission (“FTC” or “Commission”), for its Complaint alleges: 1. The FTC brings this action under Sections 13(b) and 19 of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. §§ 53(b) and 57b, and the Telephone Disclosure and Dispute Resolution Act of 1992 ("TDDRA"), 15 U.S.C. § 5701 et seq., to obtain preliminary and permanent injunctive relief, restitution, disgorgement, and other equitable relief for defendants' unfair or deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), and the FTC’s 900-Number Rule, 16 C.F.R. Part 308. JURISDICTION AND VENUE 2. Subject matter jurisdiction is conferred upon this Court by 15 U.S.C. §§ 45(a), 53(b), 57b, 5711, and 28 U.S.C. §§ 1331, 1337(a), and 1345. 3. Venue in this district is proper under 15 U.S.C. § 53(b) and 28 U.S.C. §§ 1391(b) and (c). THE PARTIES 4. Plaintiff, the Federal Trade Commission, is an independent agency of the United States Government created by statute. 15 U.S.C. § 41 et seq. The Commission enforces Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), which prohibits unfair or deceptive acts or practices in or affecting commerce. The FTC also enforces the 900-Number Rule, which regulates the advertising, operation, billing, and collection of audiotext services accessed through 900 and 800 telephone numbers. The Commission may initiate federal district court proceedings to enjoin violations of the FTC Act, and the 900-Number Rule, to secure such equitable relief as is appropriate in each case, including restitution for injured consumers. 15 U.S.C. §§ 53(b), 57b, and 5711(c). 5. Defendant International Telemedia Associates, Inc., ("ITA"), also doing business as ITA, is a Georgia corporation having its office and principal place of business at 340 Interstate North Parkway, Suite 200, Atlanta, Georgia. ITA transacts or has transacted business in this district. 6. Defendant Online Consulting Group, Inc., ("Online") is a Florida Corporation having its office and principal place of business at 550 Fairway Drive, Suite #210, Deerfield Beach, Florida. Online itself, or through its agent ITA, transacts or has transacted business in this district. 7. Defendant Arjuna Diaz, a/k/a Ronald P. Diaz, is the sole shareholder and Chairman of the Board of Directors of ITA. Defendant Diaz has his principal place of business at 340 Interstate North Parkway, Suite 200, Atlanta, Georgia. At all times material to this complaint, acting alone or in concert with others, he has formulated, directed, controlled, or participated in the acts and practices of ITA set forth in this complaint. Diaz transacts or has transacted business in this district 8. Defendant Gerard Robert Engle is the President of ITA. Defendant Engle has his principal place of business at 340 Interstate North Parkway, Suite 200, Atlanta, Georgia. At all times material to this complaint, acting alone or in concert with others, he has formulated, directed, controlled, or participated in the acts and practices of ITA set forth in this complaint. Engle transacts or has transacted business in this district. 9. Defendant David Peterson, Jr., is the President and sole owner of Online. Defendant Peterson has his principal place of business at 550 Fairway Drive, Suite #210, Deerfield Beach, Florida. At all times material to this complaint, acting alone or in concert with others, he has formulated, directed, controlled, or participated in the acts and practices of Online set forth in this complaint. COMMERCE 10. At all times material to this complaint, defendants’ course of business, including the acts and practices alleged herein, has been and is in or affecting commerce, as “commerce” is defined in Section 4 of the FTC Act, 15 U.S.C. § 44. DEFINITIONS 11. For the purpose of this complaint, “Local Exchange Carrier” or “LEC” means the local telephone company from which a line subscriber receives his or her telephone bill. 12. For the purpose of this complaint, "line subscriber" means an individual or entity who has arranged with a LEC to obtain local telephone service provided through an assigned telephone number, and to be billed for such service on a monthly (or other periodic) basis. 13. For the purpose of this complaint, “audiotext services” means information or entertainment programs that are provided over the telephone and that consumers access by dialing various 800, 888, 900, 500 and international dialing patterns (or by accepting "collect" return calls). 14. For the purpose of this complaint, “enhanced services” means any offering over the telecommunications network which is more than a basic transmission service. The most common enhanced services bear some relation to telephone usage -- audiotext services and voice mail are two common examples of enhanced services. 15. For the purpose of this complaint, “service vendor” or "vendor" means an entity that offers audiotext or other enhanced services that are billed to line subscribers on the telephone bills received by line subscribers from their LECs. 16. For the purpose of this complaint, “billing aggregator” means an entity that, on behalf of one or more service vendors, arranges to have charges for vendors’ audiotext or other enhanced services placed on the telephone bills sent to line subscribers from their LECs, arranges for the LECs to collect those charges from line subscribers, and arranges for service vendors to receive payment for their services. 17. For the purpose of this complaint, “Online defendants” means corporate defendant Online Consulting Group, Inc., and individual defendant David Peterson, Jr.. 18. For the purpose of this complaint, “ITA defendants” means corporate defendant International Telemedia Associates, Inc. (also doing business as ITA) and individual defendants Arjuna Diaz, a/k/a Ronald P. Diaz, and Gerard Robert Engle. DEFENDANTS’ BUSINESS PRACTICES 19. Online promotes and sells audiotext services through 800 or 900 numbers. Online uses ITA as its billing aggregator, as do numerous other vendors of audiotext or other enhanced services. 20. Defendant ITA is a billing aggregator. ITA arranges to have the charges for services of its clients, such as Online, placed on line subscribers’ telephone bills. ITA contracts with LECs such as Bell Atlantic, Ameritech and Pacific Bell -- the local telephone companies from which line subscribers receive their telephone service and billing -- to place the charges for Online’s audiotext service on line subscribers’ telephone bills. Charges for Online’s services generally appear on a separate page titled "ITA" or "Intn’l Telemedia Assoc" that the LECs insert into line subscribers’ telephone bills. ITA/Online bills look much like the bill page attached as Exhibit A to this Complaint. ONLINE’S ACTIVITIES 21. Some consumers’ first contact with either Online or ITA occurs when they receive a telephone bill that includes charges billed by ITA on behalf of Online. Other consumers’ first contact with Online comes through Online’s advertisements for its audiotext service. 22. Online advertises in newspapers and other periodicals, offering to provide “free matching” services with "local singles." Online’s advertisements urge consumers to call specified telephone numbers with "800" or "888" number prefixes. 23. It is widely understood by consumers that 800 and 888 number telephone calls are "toll-free" and that callers therefore will incur no charges for dialing any telephone number with an 800 or 888 number prefix. 24. When a consumer, responding to Online’s advertisements, calls one of Online’s toll-free numbers, the consumer reaches an Online representative, who typically asks the consumer where he or she is calling from and what sort of person he or she wants to meet. 25. Typically, after the caller provides personal information about the caller’s interests in a match, the Online representative tells the caller that Online will have a "local single" return the call. In numerous instances, the Online representative does not disclose, in a manner likely to be heard and understood by the caller, that Online charges for its service, the amount that Online will charge for the return call, or that charges for the service will appear on the monthly billing statement for the telephone from which the consumer reached Online’s 800 number. 26. After obtaining information about the caller’s preferences, Online terminates the call. Online then delivers its audiotext service through a return call to the number from which the caller initially dialed Online’s toll-free number. Often, callers receive repeated return calls over the course of several days from Online employees posing as "local singles." 27. Based on Online’s advertisements offering "free matches," and based on the fact that 800 numbers are widely understood to be toll-free, a consumer responding to Online’s advertisements has no reason to suspect that Online will charge for its service and that it will bill charges for its audiotext service to the telephone line from which the consumer dials Online’s toll-free number and on which Online’s return calls are received. 28. Consumers who call Online’s 800 numbers and subsequently receive return audiotext calls, later receive telephone bills indicating that Online’s return audiotext calls originate in Deerfield, Florida. 29. The billing information Online forwards to ITA, and that ITA in turn forwards to the LECs, is based upon “automatic number identification” (ANI) which Online uses when it receives a call to its toll-free number. ANI technology, similar to “caller ID” service, identifies the telephone number from which the call to Online’s 800 or other toll-fee numbers originates, but cannot identify the caller, and cannot determine whether a caller is the line subscriber for the line from which the call originates. 30. In numerous instances, Online, using ITA as its billing aggregator, has billed line subscribers approximately $3.99 per minute for Online’s audiotext "singles" service. In some cases, the ITA/Online bills do not identify the actual audiotext service provided by Online, but instead state that the line subscriber is being charged for "collect calls" or long distance calls from Deerfield Beach, Florida. Other ITA/Online bills reveal even less information about the actual services that give rise to these bills. The ITA/Online billing pages often include start times for the alleged direct or collect calls from Deerfield Beach for which the line subscriber is being billed, and, in a number of instances, the ITA/Online bills reflect two calls allegedly occurring during overlapping periods of time to the same telephone number. 31. Many line subscribers who receive these bills do not know what they are being billed for. In some instances, line subscribers have been able to trace the source of the billing to the return calls received after the toll-free calls they made in response to Online’s advertisements. However, in numerous instances, neither the line subscriber nor anyone in the line subscriber’s household has ever heard of Online or ITA or placed or received the telephone call or calls that supposedly initiated Online’s return “singles matching” audiotext calls. 32. Regardless of whether the line subscriber can trace the ITA/Online charge to an initial toll-free call made in response to an Online advertisement for free matching services, line subscribers are generally shocked and surprised to find these unexpected and substantial charges on their telephone bills. ITA’S BUSINESS PRACTICES 33. In addition to arranging with the LECs to have charges for its vendor clients’ services included in line subscribers’ local phone bills, ITA is responsible, under its contracts with Online (and its other vendor clients), for answering consumer inquiries and complaints relating to the charges for those vendors’ services that appear on the ITA page of line subscribers’ telephone bills. Accordingly, each line subscriber’s bill that has an ITA charge on behalf of Online also lists an ITA 800 or other toll-free number the line subscriber can call to reach ITA customer service. 34. As a general matter, when a line subscriber or the line subscriber’s representative (usually a spouse) calls ITA to inquire about a charge, ITA representatives, under the terms of ITA’s contracts with Online and its other service vendor clients, are authorized to inform the caller about the basis of the charge, exercise their discretion to sustain the charge, negotiate the amount of the charge, or forgive the charge entirely. 35. Because of ITA’s responsibility for customer inquiries arising from charges for its vendor clients’ services, in numerous instances, ITA has possessed or has received information from complaining consumers indicating that ITA and Online are, in numerous instances, improperly billing line subscribers. In numerous instances line subscribers have complained to ITA that they did not purchase, or did not receive, Online’s services. 36. Nevertheless, in numerous instances, consumers who have called ITA’s toll-free numbers to inquire about Online charges that appear on the ITA page of their telephone bills found it next to impossible to reach an ITA representative at the toll-free number listed on the ITA bill they have received. In many instances, instead of reaching an ITA representative when they dial ITA’s toll-free number, consumers have reached a recorded message telling them that if they are waiting for a credit on their telephone bill they should expect to wait 6 to 8 weeks, and if they need to reach a representative they will have to try back later because all operators are busy. In other instances, consumers are put on hold for long periods of time before they reach an ITA representative. It many cases consumers have spent the better part of several days simply trying to reach an ITA representative who can answer questions about the consumer’s bill. 37. In numerous instances, consumers, once they succeed in reaching an ITA representatives, have experienced rude, accusatory, and unyielding treatment in response to their attempts to dispute charges and explain why ITA’s billing is in error. ITA representatives have told consumers that, regardless of the explanation, a line subscriber is responsible for the charges appearing on his or her phone bill. 38. In numerous instances, ITA representatives refuse to credit line subscribers’ accounts for disputed charges, claiming that ITA lacks authority to do so, since it only bills on behalf of a third party. In fact, ITA has the contractual right to negotiate or forgive the charges placed on line subscribers’ phone bills for services purportedly provided by Online and its other vendor clients. VIOLATIONS OF SECTION 5 OF THE FTC ACT 39. Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), prohibits unfair or deceptive acts or practices in or affecting commerce. COUNT I (ONLINE DEFENDANTS) 40. In numerous instances, defendant Online solicits consumers to dial its 800 or other toll-free numbers through the use of advertisements that represent, expressly or by implication, that callers to Online’s 800 or other toll-free numbers will "get matched free" with "local singles." 41. In truth and in fact, callers to Online’s 800 or other toll-free numbers do not get matched free with local singles. Online bills charges of approximately $3.99 per minute for its “matching” services, delivered via return calls, to the line subscriber of the telephone line used by the caller to call Online’s 800 number. Moreover, Online’s return calls are not from "singles" in the geographic area of the recipient of Online’s services, but are from Online employees operating through Online’s telephone lines in Florida. 42. Therefore, Online’s representations as set forth, above, in paragraph 40, are false and deceptive, in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a). COUNT II (ONLINE DEFENDANTS) 43. In numerous instances, defendant Online solicits consumers to dial its 800 or other toll-free numbers through the use of advertisements that represent, expressly or by implication, that by calling Online’s 800 or other toll-free numbers consumers can "get matched free" with "local singles." 44. After a consumer calls an Online 800 or other toll-free number, Online places one or more return calls to the line from which the initial toll-free number was called. Online delivers audiotext services via these return calls. Online charges approximately $3.99 a minute for such audiotext services. 45. In view of Online’s representations, as set forth in paragraph 43, above, that by calling an Online 800 or other toll-free number a consumer can "get matched free" with "local singles,” it is deceptive, in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), for Online to fail to disclose the material information, set forth in paragraph 44, above, that: (a) after a consumer calls one of Online’s toll-free numbers, Online provides audiotext services through return calls directed to the telephone line initially used to call Online’s toll-free number; and (b) Online charges approximately $3.99 a minute for such audiotext services. COUNT III (ITA and ONLINE DEFENDANTS) 46. In numerous instances, defendants ITA and Online represent, expressly or by implication, that a line subscriber’s telephone was used to call an Online 800 or other toll-free number and, subsequently, to receive audiotext services delivered by means of a return call from Online, and that, therefore, the line subscriber is legally obligated to pay defendants for such audiotext services, regardless of whether the line subscriber purchased them. 47. In truth and in fact, in numerous instances, the line subscriber is not legally obligated to pay ITA and Online for audiotext services that were not purchased by the line subscriber. 48. Therefore, the representations of ITA and Online as alleged in paragraph 46, above, are false and deceptive, in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a). COUNT IV (ITA and ONLINE DEFENDANTS) 49. In numerous instances, based on the use or purported use of a line subscriber’s telephone to call to Online’s 800 or other toll-free number and to receive Online’s audiotext services through a subsequent return call, defendants ITA and Online, directly or through an intermediary, have billed, attempted to collect, and collected charges, from a line subscriber who did not access or purchase Online’s audiotext services. 50. A line subscriber, even though he or she has not accessed or purchased Online’s audiotext service, cannot reasonably avoid defendants’ billing and collection efforts for audiotext services accessed or received, or purportedly accessed or received, on the line subscriber’s line, because such line subscriber cannot reasonably block telephone calls from his or her telephone line to 800 or other toll-free numbers, nor can such line subscriber reasonably block return calls to his or her telephone line that result from such calls. 51. Defendants’ practice of billing, attempting to collect, and collecting charges for Online’s audiotext services from a line subscriber who did not purchase or receive such services, based on the use, or purported use, of a line subscriber’s telephone to call to Online’s 800 or other toll-free number and to receive Online’s audiotext services through a subsequent return call, causes substantial injury to consumers that is not outweighed by countervailing benefits to consumers or competition. 52. Therefore, the practice of defendants Online and ITA, as alleged above, is unfair and violates Section 5(a) of the FTC Act, 15 U.S.C. § 45(a). THE 900 NUMBER RULE 53. The Commission’s 900-Number Rule, 16 C.F.R. Part 308, became effective on November 1, 1993, and implements the requirements of the TDDRA, 15 U.S.C. § 5701 et seq. The 900-Number Rule prohibits any person from using an 800 or other toll-free number in a manner that would result in: a charge to the calling party for completing the call; connecting or transferring the calling party to a pay-per-call service; a charge to the calling party for audiotext conveyed during the call unless the calling party pays by credit card or has previously agreed to be billed for the audiotext; or a collect return call to the calling party. 16 C.F.R. § 308.5(i). 54. The 900-Number Rule also prohibits "referring in advertisements to an 800 telephone number, or any other telephone number advertised or widely understood to be toll-free, if that number violates the prohibition concerning toll-free numbers set forth in § 308.5(i)." 55. At all times relevant to this Complaint, the acts and practices of defendant Online, as alleged herein, have included the advertising, promotion, marketing of audiotext services accessed through 800 or other toll-free numbers or 900 numbers. DEFENDANTS’ VIOLATIONS OF THE 900 NUMBER RULE COUNT V (ONLINE DEFENDANTS) 56. Section 308.5(i) of the 900-Number Rule prohibits using an 800 or other telephone number advertised as or widely understood to be toll-free in a manner that would result the calling party being called back collect for the provision of audio information or simultaneous voice conversation services (i.e., audiotext services). 57. Section 308.3(i) of the 900-Number Rule prohibits a pay-per-call provider from "referring in advertisements to an 800 telephone number, or any other telephone number advertised or widely understood to be toll-free, if that number violates the prohibition concerning toll-free numbers set forth in § 308.5(i)." 58. In numerous instances, defendant Online has used an 800 or other telephone number advertised as or widely understood to be toll-free in a manner that results in the calling party being called back collect for the provision of audio information or simultaneous voice conversation services (i.e., audiotext services). Defendants Online and ITA, directly or through an intermediary, have billed, attempted to collect, and collected charges for such return calls for the provision of audio information or simultaneous voice conversation services. 59. Therefore, defendant Online, as alleged above, has violated the 900-Number Rule, 16 C.F.R. § 308.5(i). CONSUMER INJURY 60. Consumers throughout the United States have suffered and continue to suffer substantial monetary loss as a result of defendants' unlawful acts or practices. In addition, defendants have been unjustly enriched as a result of their unlawful practices. Absent injunctive relief by this Court, defendants are likely to continue to injure consumers, reap unjust enrichment, and harm the public interest. THIS COURT'S POWER TO GRANT RELIEF 61. Section 13(b) of the FTC Act, 15 U.S.C. § 53(b), empowers this Court to grant injunctive and other ancillary relief, including consumer redress, disgorgement, and restitution to prevent and remedy any violations of any provision of law enforced by the Commission. 62. Section 19 of the FTC Act, 15 U.S.C. § 57b, and Section 5711 of TDDRA, 15 U.S.C. § 5711, authorize this Court to grant such relief as the Court finds necessary to redress injury to consumers or other persons resulting from defendants’ violations of the 900-Number Rule, including the refund of money. PRAYER FOR RELIEF WHEREFORE, plaintiff, the Federal Trade Commission, requests that this Court, as authorized by Sections 13(b) and 19 of the FTC Act, 15 U.S.C. §§ 53(b) and 57b, and pursuant to its own equitable powers:
additional relief as the Court may determine to be just and proper. Respectfully submitted, Debra Valentine _______________________ _________________________ CHRIS M. COUILLOU Dated: July 10, 1998 |