Spyware settlement announced

FTC orders AOL subsidiary to clearly disclose whether software leads to pop-up ads

August 04, 2005|By Tricia Bishop | Tricia Bishop,SUN STAFF

America Online Inc., which centered a humorous advertising campaign on its efforts to protect people from Internet intrusions, found itself answering yesterday for a Baltimore subsidiary that was accused of installing spyware on people's computers -- under the guise that it was providing spyware protection.

AOL wasn't named or included in a settlement announced yesterday between the Federal Trade Commission and Advertising.com, which AOL acquired last year for $435 million. The incidents took place in 2003.

Under the agreement, Advertising.com and its co-founder and president John Ferber were ordered from now on to "clearly and prominently" disclose whether software they're advertising could track a user's online actions and then deliver targeted pop-up ads, or adware. The company had been accused of slipping that information in surreptitiously.

Ferber was specifically named because of his position in the company and his personal actions, the commission said. He will also be required to notify the FTC if he becomes affiliated with another company or leaves Advertising.com within the next 10 years.

"[Advertising.com] had ended this experiment long before we acquired them," AOL spokesman Andrew Weinstein was quick to point out yesterday. "We do not distribute adware programs or spyware, and we don't do business with adware or spyware [purveyors]."

The news was a second troubling report yesterday for AOL, whose parent Time Warner Inc. announced earlier that it planned to pay $2.4 billion to end shareholder lawsuits stemming from its 2001 merger with AOL.

The Advertising.com order, which is open for comment for the next 30 days before the commission finalizes it, is the agency's fourth spyware/adware case.

The FTC began last spring a legal campaign against programs that, often without the user's knowledge, cause ads to pop up on computer screens or, at worst, allow information to be stolen. In October, the commission filed its first lawsuit against a New Hampshire man charged with luring people to Web sites and then seizing control of their computers. That case is expected to go to trial this fall.

Spyware and adware are only illegal when they're installed on computers without adequate notice or when used to steal information, but they are often seen as huge annoyances and can be costly.

"Ultimately, we're trying to make sure that companies are upfront about what the bargain is so consumers can really make a choice" before downloading a product, said Thomas B. Pahl, assistant director in the FTC's division of advertising practices.

A report from FaceTime Communications, a California Internet security company, yesterday estimated that adware and spyware cost businesses tens of thousands of dollars a month in technical time and resources to remove them. The programs eat up computer storage, can slow responses and interfere with networks. In some cases, the programs can detect a user's keystrokes and enable theft of personal data such as credit card numbers.

In a release yesterday, the FTC said Advertising.com had "violated federal law by offering free security software, but failing to disclose adequately that adware was bundled with the software."

In 2003, the company distributed ads on the Internet offering a free software program called "SpyBlast." The promotion claimed to protect computers from outside attacks and "unauthorized users." What it didn't reveal -- at least not clearly enough, according to the FTC -- was that the software would also install programs to track the users' movements and deliver targeted "pop-up" ads. The company did disclose the marketing messages in a license agreement, but that wasn't sufficient, the commission said.

The FTC launched its investigation into Advertising.com about a year ago, after the company had abandoned the SpyBlast software.

A spokeswoman for Advertising.com yesterday said no one there was available to talk to media and directed calls to Reston-based AOL, whose attorneys arranged the settlement with the FTC.

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