Annoying online advertiser to pay record $2.9 million to settle FTC charges

It probably won't do away with those annoying "YOU HAVE WON" banner ads but online advertiser ValueClick, today agreed to pay a record $2.9 million to settle Federal Trade Commission charges that its advertising claims and e-mails were deceptive and violated federal law.

Aside from being deceptive and generally annoying, the FTC also charged that ValueClick and its subsidiaries, Hi-Speed Media and E-Babylon failed to secure consumers' sensitive financial information, despite their claims to do so. The FTC alleged the companies published online privacy policies claiming they encrypted customer information, but either failed to encrypt the information at all or used a non-standard and insecure form of encryption.

The agency also charged that several of the companies' e-commerce Web sites were vulnerable to SQL injection, contrary to claims that the companies implemented reasonable security measures.

The settlement, filed by the Department of Justice on behalf of the FTC, requires ValueClick to clearly and conspicuously disclose the costs and obligations consumers must incur to receive the products it touts as "free" and bars future violations of the CAN-SPAM Act. The settlement also bars deceptive claims about the security of the consumer information collected at its e-commerce Web sites.According to the FTC, ValueClick subsidiary Hi-Speed Media used deceptive e-mails, banner ads, and pop-ups to drive consumers to its Web sites. The e-mails and online ads claimed that consumers were eligible for "free" gifts, including laptops, iPods, and high-value gift cards, and included come-ons such as "Free PS3 for survey," and "CONGRATULATIONS! Select your FREE Plasma TV."

The FTC alleged that consumers lured to ValueClick's Web sites by these promises were led through a maze of expensive and burdensome third-party offers - including car loans and satellite television subscriptions - which they were required to "participate in" at their own expense, in order to receive the promised "free" merchandise.

The FTC charged that ValueClick's use of deceptively labeled e-mail offering free gifts and its failure to disclose that consumers must spend lots of money to obtain the promised "free" merchandise violates the CAN-SPAM Act and the FTC Act. This is the FTC's third case targeting the use of deceptive promises of free merchandise by Internet-based lead generation operations, and the Commission's 18th case challenging data security practices by a company handling sensitive consumer information, the FTC said.

Last month Member Source Media, an online advertising firm, reached a $200,000 settlement this week with the Federal Trade Commission for using what the FTC described as "deceptive" spam and ads to draw users to its Web sites. Commonly, the commission says, Member Source Media would send out spam e-mails that promised prizes such as a free iPod or a $500 Visa gift card. Additionally, the company would pay for ads on Web sites that told users that they had been chosen to win similar prizes.

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