News Corp.’s social networking property MySpace has reached an agreement to collect $6 million from Scott Richter and his Web marketing company, Media Breakaway LLC, for allegedly spamming its users with unsolicited advertisements. The charges originated in January 2007.
“We respect the arbitrator’s findings regarding violations of MySpace’s terms of use by certain rogue affiliates, particularly during 2006 when the concept of social networks was still developing,” said Steven Richter, president and general counsel at Media Breakaway and father of Scott Richter, in a statement. “We acknowledged early on in this process that our company should not profit from the sending of unsolicited commercial bulletins to MySpace users and offered to return any such profit to MySpace, and we repeatedly offered to work with MySpace to resolve mutual concerns.”
According to the decision, Media Breakaway must pay MySpace $4.8 million in damages and $1.2 million in attorney’s fees. It is also banned from the site.
The final award in favor of MySpace was 95% less than the amount demanded by MySpace, as the arbitrator determined that “MySpace’s demands are so disproportionate to proven actual damages, or Media Breakaway profits.” The company will not be held responsible for the actions of certain affiliates who violated Media Breakaway’s own affiliate terms and conditions.
Profit figures for Media Breakaway were not available.
In September 2007, Media Breakaway LLC was named one of the fastest growing private companies in the US, ranking No. 189 on the Inc. 500 list with a four-year growth rate of more than 1,100%.
The arbitrator ruled that while Media Breakaway should be held responsible for a number of unsolicited commercial bulletins sent to MySpace users in violation of MySpace’s Terms of Use
The decision was made by an arbitrator on June 12 and comes after a $230 million verdict in the social network’s favor last month against Sanford Wallace and Walter Rines in US District Court in Los Angeles.
MySpace has recently presented a strong stance against spammers and phishers on its site. At this month’s Authentication and Online Trust Alliance conference in Seattle, Hemanshu Nigam, chief security officer at Fox Interactive and MySpace, went into detail about the company’s partnerships with other companies, the FTC and law enforcement to prosecute spammers and protect members’ safety.
“It’s not just about blocking, we want the message to be, ‘don’t go to MySpace if you are going to participate in illegal activity,’” Nigam said at the conference.
Scott Richter has been involved in other spam cases. Microsoft Corp. won a $7 million settlement against him in a spam lawsuit in 2005, and the state of New York got $50,000 from Richter in 2004.
