The Secure Times

An online forum of the ABA Section of Antitrust Law's Privacy and Information Security Committee

FTC settles with Adteractive

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On November 28, 2007, the Federal Trade Commission issued a Press Release announcing its settlement with Adteractive, Inc., an large online marketer that advertises and markets its offers through e-mails and Web-based ads.  Essentially, the FTC took action against Adteractive for violations of the FTC Act and the CAN-SPAM Act.  The FTC’s complaint and final stipulated order were filed by the Department of Justice on behalf of the FTC in the U.S. District Court for the Northern District of California (United States of America (for the Federal Trade Commission), Plaintiff, v. Adteractive, Inc., doing business as FreeGiftWorld.com and SamplePromotionsGroup.com, N.D. Cal., No. CV-07-5940, complaint filed 11/26/07, stipulated final order filed 11/27/07). 

The FTC’s complaint alleged that Adteractive used misleading tactics (including using spam e-mails with misleading subject lines) to lure consumers to its Web sites.  

The e-mails sent by Adteractive to consumers allegedly contained subject lines such as “Test and keep this Flat-Screen TV” and “Congratulations! You’ve Been Chosen to Receive a Free $1000 Check!.”  Adteractive’s Web-based ads also allegedly contained similar language that essentially promised that the consumer would receive free merchandise.   According to the complaint, both the e-mails and the ads contained links that led consumers to Web pages operated by Adteractive or its affiliates, which led the consumers through a series of other Web pages, promotions and activities which required the consumers to enter additional personal information and/or accept and pay for a certain number of goods or services promoted by third parties in order to qualify for the merchandise promised to them in the original e-mail or ad.  Some of these third party promotions included applying for and qualifying for credit cards and automobile loans. 

According to the complaint, Adteractive failed to clearly and conspicuously disclose to consumers the material terms and conditions of its programs, including that consumers would have to incur financial and non-financial obligations in order to actually receive the so-called "free" gifts and prizes it offered.  The FTC claimed that such failures violated Section 5(a) of the FTC Act, which prohibits unfair or deceptive practices.  Additionally, the FTC alleged that Adteractive violated the CAN-SPAM Act by initiating commercial e-mail messages “that contained subject headings that would be likely to mislead a recipient, acting reasonably under the circumstances, about a material fact regarding the contents or subject matter of the message.”

The settlement requires that Adteractive clearly and conspicuously disclose in its e-mails and ads that consumers have to incur certain obligations (either financial or otherwise) in order to qualify for their chosen gift or promised “free” merchandise.  The settlement also required that Adteractive provide a list of such obligations that the consumer is likely to incur.  Finally, the settlement prohibits future CAN-SPAM violations and imposed a $650,000 penalty (which FTC Commissioner Jon Leibowitz found to be inadequate, an opinion he expressed in a published dissenting opinion to the order).

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Author: ABA Antitrust

Learn more about the ABA Section of Antitrust Law: http://ambar.org/antitrust

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