U.S. FTC settles with marketers of 'free' software CDs

A Texas company that offered supposedly free software on CDs, but then billed customers for a software-continuity program they didn't sign up for, will pay nearly US $2.2 million to settle charges levied by the U.S. Federal Trade Commission, the agency announced.

The FTC, in a civil lawsuit, said defendants Think All Publishing, successor company to Manay Software, and owner Yuri Mintskovsky, ran a Web site that offered consumers a free CD containing software if they agreed to pay shipping and handling of $1.99 to $2.99.

Consumers had to provide their names, addresses and a credit or debit card number to cover postage and handling, the FTC said Wednesday. Consumers who signed up for the free CD were then offered three more free CDs with no additional shipping or handling fees.

Before consumers completed the transaction, they had to check a box saying they agreed to the terms of use. The terms of use included software licensing arrangements and usage rules, and many consumers checked the box without clicking on an included hyperlink or reading the form, the FTC said.

The seventh paragraph of the single-spaced document included language that "contradicted the free software claim," the FTC said in a news release. That language said consumers would be required to send back two of the four supposedly free CDs within 10 days, or they would be charged a fee of $39 to $49. In addition, it said consumers would be enrolled in a software-continuity program and would receive additional CDs in the future for a cost of $39 to $49, unless they returned the CDs within 10 days.

Most consumers did not know about these charges or the continuity plan until they were billed, the FTC alleged. The defendants did not adequately notify consumers, making it impossible for consumers to avoid the charges, the agency said.

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 FTC asked the U.S. District Court for the Eastern District, Sherman Division, to halt to the unfair and deceptive practices and to order the defendants to give up their profits from the operation.

The settlement bars the defendants from making misrepresentations, including saying that items are free when they aren't. 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.

In addition, the settlement prohibits the defendants from sharing their customer lists, in addition to the $2.2 million in consumer redress.

The IDG News Service is a Network World affiliate.