Online advertiser ValueClick Inc. and its subsidiary Hi-Speed Media have agreed to pay a $2.9 million civil penalty to settle Federal Trade Commission charges that its advertising and e-mails were deceptive and violated federal law, in the biggest CAN-SPAM settlement since its inception in 2003.
ValueClick agreed to the settlement without an admission of liability or concession that it violated any laws.
“While we still feel strongly that we were in compliance. we didn’t want to spend the time and money going through a lengthy trial,” said John Ardis, VP of corporate strategy at ValueClick Inc. “While we made the decision to accept it, at the same time we wanted to work with the FTC to make sure that the language of the laws were more clear, which we have been doing over the past few months. We are happy that now it is much clearer and less open to different interpretations.”
According to the FTC complaint, which was signed out of court by both parties, consumers who came to ValueClick’s Web sites because of promised free gifts were instead led through a confusing series of third-party offers, including car loans and satellite television subscriptions, which required consumers to spend money in order to receive the “free” merchandise.
“We’ve been looking at the lead-generation industry for a while and have brought two other cases forward,” said Stephen Cohen, senior attorney, division of marketing at the FTC. “The principal thing that they are doing wrong is telling people that they are going to get something for free and not telling them that they actually have to spend money to receive the free gift.”
The settlement was filed in US District Court for the Central District of California by the Department of Justice at the FTC’s request, where it awaits the approval of a judge. It requires ValueClick to more clearly disclose the costs and obligations of its products that it promotes as “free” to consumers and bars future violations of the CAN-SPAM Act. The settlement also bans deceptive claims about the security of the consumer information collected on ValueClick’s e-commerce Web sites.
The FTC charged that ValueClick’s use of deceptively labeled e-mail offering free gifts and its failure to disclose that consumers must spend substantial sums of money to obtain “free” merchandise violates the CAN-SPAM Act and the FTC Act. Also, according to the FTC, ValueClick subsidiary Hi-Speed Media used deceptive e-mails, banner ads, and pop-up ads promoting “free” gifts such as laptops, iPods and gift cards to drive consumers to its Web sites. Some of the calls to action included lines such as, “Free PS3 for survey,” and “CONGRATULATIONS! Select your FREE Plasma TV.”
The FTC also charged that ValueClick, Hi-Speed Media, and E-Babylon misrepresented the security of customers’ sensitive financial information. The complaint alleges that 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.
