"Free software" scammers out $2.2 million

Scammers who allegedly offered “free” software CDs that weren’t free then billed unsuspecting consumers for a software continuity program they didn’t know they were enrolled in, have settle charges with the Federal Trade Commission today.

The settlement forces the defendants to give up almost $2.2 million for consumer reimbursement. In January 2007, the FTC charged that Think All Publishing, successor company to Manay Software and Yuri Mintskovsky’s 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 provided their names and addresses to receive the CD and a credit or debit card number to cover postage and handling. Consumers who signed up for the free CD were then offered three more free software CDs with no additional shipping or handling fees, the FTC said.  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 reading the form.    

But buried in the seventh paragraph of the single-spaced document was language that contradicted the free software claim. It stated that consumers would be required to send back two of the four “free” CDs within 10 days or they would be charged a fee of $39 to $49. It also stated that consumers would be enrolled in a software continuity program, would receive additional CDs in the future, and would be charged $39 to $49 for those CDs unless they returned them within 10 days, the FTC said.  

The FTC alleged in its complaint that most consumers did not know about these charges or the 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 also charged them with violating the Unordered Merchandise Statute, which prohibits billing recipients for merchandise they did not order.  

The settlement bars the defendants from making misrepresentations, including misrepresenting that items are “free” when they aren’t. It requires that the defendants disclose all the terms and conditions of any negative option offer. It bars the defendants from charging consumers for products or services without their consent, and without first disclosing the terms of any refund or cancellation policy.

The settlement also prohibits the defendants from sharing their customer lists, and contains bookkeeping and record keeping provisions to allow the agency to monitor their compliance. Finally, under the terms of the settlement, the defendants will pay approximately $2,167,500 in consumer compensation.   

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