[Federal Register Volume 72, Number 36 (Friday, February 23, 2007)]
[Notices]
[Pages 8161-8163]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-3058]
=======================================================================
-----------------------------------------------------------------------
FEDERAL TRADE COMMISSION
[File No. 052 3131]
DirectRevenue LLC, DirectRevenue Holdings LLC, Joshua Abram,
Daniel Kaufman, Alan Murray, and Rodney Hook; Analysis of Proposed
Consent Order To Aid Public Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed consent agreement.
-----------------------------------------------------------------------
SUMMARY: The consent agreement in this matter settles alleged
violations of federal law prohibiting unfair or deceptive acts or
practices or unfair methods of competition. The attached Analysis to
Aid Public Comment describes both the allegations in the draft
complaint and the terms of the consent order--embodied in the consent
agreement--that would settle these allegations.
DATES: Comments must be received on or before March 21, 2007.
ADDRESSES: Interested parties are invited to submit written comments.
Comments should refer to ``DirectRevenue LLC, et al., File No. 052 3131
to facilitate the organization of comments. A comment filed in paper
form should include this reference both in the text and on the
envelope, and should be mailed or delivered to the following address:
Federal Trade Commission/Office of the Secretary, Room 135-H , 600
Pennsylvania Avenue, NW., Washington, DC 20580. Comments containing
confidential material must be filed in paper form, must be clearly
labeled ``Confidential,'' and must comply with Commission Rule 4.9(c).
16 CFR 4.9(c) (2005).\1\ The FTC is requesting that any comment filed
in paper form be sent by courier or overnight service, if possible,
because U.S. postal mail in the Washington area and at the Commission
is subject to delay due to heightened security precautions. Comments
that do not contain any nonpublic information may instead be filed in
electronic form as part of or as an attachment to e-mail messages
directed to the following e-mail box: [email protected].
---------------------------------------------------------------------------
\1\ The comment must be accompanied by an explicit request for
confidential treatment, including the factual and legal basis for
the request, and must identify the specific portions of the comment
to be withheld from the public record. The request will be granted
or denied by the Commission's General Counsel, consistent with
applicable law and the public interest. See Commission Rule 4.9(c),
16 CFR 4.9(c).
---------------------------------------------------------------------------
The FTC Act and other laws the Commission administers permit the
collection of public comments to consider and use in this proceeding as
appropriate. All timely and responsive public comments, whether filed
in paper or electronic form, will be considered by the Commission, and
will be available to the public on the FTC Web site, to the extent
practicable, at http://www.ftc.gov. As a matter of discretion, the FTC
makes every effort to remove home contact information for individuals
from the public comments it receives before placing those comments on
the FTC Web site. More information, including routine uses permitted by
the Privacy Act, may be found in the FTC's privacy policy, at http://www.ftc.gov/ftc/privacy.htm.
FOR FURTHER INFORMATION CONTACT: Mamie Kresses (202/326-2070) or Stacey
Freguson (202/326-2361), Bureau of Consumer Protection, 600
Pennsylvania Avenue, NW., Washington, DC 20580.
SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Sec. 2.34 of
the Commission Rules of Practice, 16 CFR 2.34, notice is hereby given
that the above-captioned consent agreement containing a consent order
to cease and desist, having been filed with and accepted, subject to
final approval, by the Commission, has been placed on the public record
for a period of thirty (30) days. The following Analysis to Aid Public
Comment describes the terms of the consent agreement, and the
allegations in the complaint. An electronic copy of the full text of
the consent agreement package can be obtained from the FTC Home Page
(for February 16, 2007), on the World Wide Web, at http://www.ftc.gov/os/2007/02/index.htm. A paper copy can be obtained from the FTC Public
Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW., Washington,
DC 20580, either in person or by calling (202) 326-2222.
Public comments are invited, and may be filed with the Commission
in either paper or electronic form. All comments should be filed as
prescribed in the ADDRESSES section above, and must be received on or
before the date specified in the DATES section.
Analysis of Agreement Containing Consent Order To Aid Public Comment
The Federal Trade Commission has accepted, subject to final
approval, an
[[Page 8162]]
agreement containing a consent order from proposed respondents
DirectRevenue LLC, DirectRevenue Holdings LLC, Joshua Abram, Daniel
Kaufman, Alan Murray, and Rodney Hook, individually and as officers of
DirectRevenue LLC (together, ``the respondents''). The proposed consent
order has been placed on the public record for thirty (30) days for
receipt of comments by interested persons. Comments received during
this period will become part of the public record. After thirty (30)
days, the Commission will again review the agreement and the comments
received, and will decide whether it should withdraw from the agreement
or make final the agreement's proposed order.
General Allegations
The respondents develop, market, and distribute via Internet
downloads advertising software programs (``adware'')--including
programs with the names Aurora, Ceres, A Better Internet,
OfferOptomizer, Twaintec, and Best Offers--that monitor consumers'
Internet use in order to display targeted pop-up ads. This matter
concerns allegations that the respondents: (1) Directly, and through a
network of numerous affiliates and sub-affiliates, installed their
adware on consumers' computers without adequate notice or consent; (2)
through affiliates and sub-affiliates, installed their adware on
consumers' computers entirely without notice or authorization; and (3)
made their adware difficult for consumers to identify, locate, and
remove.
The Commission's complaint alleges that in numerous instances the
respondents, either directly or through their affiliates and sub-
affiliates, purported to offer content to the public, such as games,
screen-savers, peer-to-peer file sharing software, and/or computer
utility programs (``lureware'') and bundled the respondents' adware
with that content. The complaint further alleges that consumers often
have been unaware that the respondents' adware would be installed on
their computers because it was not adequately disclosed to them that
downloading the lureware would result in installation of the
respondents' adware. Often, no reference to the adware was made on Web
sites offering the lureware or in the install windows. In other
instances, information about the effects of the respondents' adware
could only be ascertained, if at all, by clicking on one or more
inconspicuous hyperlinks to reach multi-page user agreements containing
such information. These inconspicuous hyperlinks were located in the
corner of Web site homepages or in modal boxes provided by the
computer's operating system.
The Commission's complaint also alleges that in numerous instances,
the respondents, through affiliates and sub-affiliates, installed the
respondents' adware on consumers' computers entirely without notice or
authorization. The complaint cites as an example unauthorized
installations conducted by the respondents' sub-affiliate, Seismic
Entertainment Productions, Inc., via an executable file that exploited
a vulnerability in Windows Media Player.
The Commission's complaint further alleges that the respondents
made identifying, locating, and removing their adware extremely
difficult for consumers. Among other practices, the respondents: failed
to identify the name or source of the adware in pop-up ads to enable
consumers to locate the adware on their computers; stored adware files
in locations on consumers' hard drives that are rarely accessed by
consumers, such as in the core systems software folders; failed to list
the adware in the Windows Add/Remove utility (a customary location for
user-initiated uninstall of software programs); where the adware was
listed in the Windows Add/Remove utility, listed it under names
resembling core systems software or applications; installed technology
on consumers' computers to reinstall the adware when it had been
uninstalled by consumers through the Windows Add/Remove utility or
deleted by anti-spyware or anti-adware programs; and when a separate
uninstall tool was provided, required consumers to follow a ten-step
procedure including downloading additional software and deactivating
firewalls, thereby exposing computers to security risks.
Deception Allegation
The Commission's complaint alleges that by offering content over
the Internet such as browser upgrades, utilities, games, screensavers,
peer-to-peer file sharing software and/or entertainment content,
without disclosing adequately that this content was bundled with the
respondents' adware, the respondents committed a deceptive practice.
The bundling of the respondents' adware, which monitors consumers'
Internet use and causes them to receive pop-up advertisements, would be
material to consumers in their decision whether to download the other
software programs and/or content.
Unfairness Allegations
The Commission's complaint also alleges that it was an unfair
practice for the respondents to install on consumers' computers,
entirely without their knowledge or authorization, adware that could
not be reasonably identified, located, or removed by consumers. In
addition, the complaint alleges that it was an unfair practice, in and
of itself, for the respondents not to provide consumers with a
reasonable means to identify, locate, and remove the respondents'
adware from their computers. The complaint further alleges that these
practices have caused or are likely to cause substantial consumer
injury that is not reasonably avoidable by consumers themselves and not
outweighed by benefits to consumers or competition.
The Proposed Consent Order
The proposed consent order contains provisions designed to prevent
the respondents from engaging in similar acts and practices in the
future and to halt continuing harm caused by the respondents' prior
unlawful practices.
Part I of the proposed order prohibits the respondents from
displaying any advertisement to, or otherwise communicating with, any
consumer's computer on which the respondents' adware was installed
prior to October 1, 2005 (``legacy program''). Part I permits the
respondents, within thirty days of entry of the final order, to send a
maximum of three notices to legacy program users informing them: that,
pursuant to the FTC settlement, they will no longer receive any
advertising or communication from the respondents; how they may
affirmatively authorize the respondents to continue serving
advertisements if consumers so choose; and how they may fully remove
the respondents' adware from their computers. If consumers fail to
respond to the notice, the adware will remain inactive.
Parts II and III prohibit the respondents from, or assisting others
in, installing software onto any computer by exploiting security
vulnerabilities or downloading or installing any software program or
application without consumers' express consent. ``Express consent'' is
defined in the proposed order to require clear and prominent disclosure
of material terms prior to and separate from any end user license
agreement, and to require consumer activation of the download or
installation by clicking a button or a substantially similar action.
Part IV requires the respondents to establish, implement, and
maintain a clearly disclosed, user-friendly mechanism through which
consumers can report and the respondents can timely address complaints
regarding the respondents' practices.
[[Page 8163]]
Part V requires the respondents to establish, implement, and
maintain a comprehensive program that is reasonably designed to require
affiliates to obtain express consent before installing the respondents'
software onto consumers' computers. Part V also contains sub-parts
mandating certain measures the respondents must take to monitor their
distribution network.
Part VI requires the respondents to identify advertisements served
via the respondents' adware in order for consumers to easily locate the
source of the advertisement, easily access the respondents' complaint
mechanism, and access directions on how to uninstall such adware.
Part VII requires the respondents to provide reasonable and
effective means for consumers to uninstall the respondents' adware.
Part IX requires the respondents to pay $1.5 million to the
Commission. This payment may be used in the Commission's sole
discretion to provide appropriate relief, which may include, but is not
limited to, the recision of contracts, payment of damages, and/or
public notification respecting such unfair or deceptive acts or
practices. If the Commission determines that such relief is wholly or
partially impracticable, any or all such funds shall be paid to the
United States Treasury.
Part X requires the respondents to cooperate with the Commission in
this action or any subsequent investigations related to or associated
with the transactions or the occurrences that are the subject of the
Complaint.
The remaining order provisions govern record retention (Part VIII),
order distribution (Part XI), ongoing reporting requirements (Parts XII
and XIII), filing a compliance report (Part XIV). Part XV provides that
the order will terminate after twenty (20) years under certain
circumstances.
The purpose of this analysis is to facilitate public comment on the
proposed order, and it is not intended to constitute an official
interpretation of the agreement and proposed order or to modify in any
way their terms.
By direction of the Commission, Commissioner Leibowitz
dissenting.
Donald S. Clark,
Secretary.
Dissenting Statement of Commissioner Jon Leibowitz
In this consent agreement, Commission staff obtained strong
injunctive relief that will put an end to practices that allowed
DirectRevenue to foist unwanted software on untold millions of
consumers. The injunctive provisions, like those in Zango, Inc., f/k/a
180 Solutions, Inc., will serve as a model to adware companies in
future. But the $1.5 million in monetary relief that the Commission
obtained as part of the consent agreement is a disappointment because
it apparently leaves DirectRevenue's owners lining their pockets with
more than $20 million from a business model based on deceit. Ben Elgin
with Brian Grow, The Plot To Hijack Your Computer, Business Week
Online, available at http://www.businessweek.com/magazine/content/06_29/b3993001.htm?chan=search (July 17, 2006).
According to the Commission's complaint, DirectRevenue downloaded
adware on consumers' computers--in many cases without notice and
consent. In other instances, to entice consumers into downloading its
nuisance adware that plagued consumers' computers with pop-ups, it even
bundled the adware with software that was supposed to block pop-ups--
the height of cynicism and disingenuousness. Moreover, the respondents
went to great lengths to ensure that consumers could not uninstall this
unwanted software, even employing ingenious (and malicious)
technologies such as code that would reinstall it if the consumer
attempted to remove it.
Even apart from the hundreds of thousands of hours people spent
closing all of these pop-up ads, how many people lost important data
because respondents' malware crashed their computer? How many people
fruitlessly spent time trying to uninstall it? How many people junked
perfectly good computers that were so burdened with unwanted adware
that they were useless? One consumer captured the frustration and anger
that consumers no doubt felt as they tried to deal with DirectRevenue's
malware: `` `You people are EVIL personified,' Kevin Horton wrote* * *
`I would like the four hours of my life back I have wasted trying to
get your stupid uninvited software off my now crippled system.' '' The
Plot To Hijack Your Computer, supra. Given the number of unwitting
DirectRevenue ``customers''--according to the New York Attorney
General's complaint there were more than 150 million software installs,
which likely served up literally billions of pop-ups \2\--Mr. Horton's
experience could not have been unusual. Some of the troubles came home
to roost: the software made the computer of one of DirectRevenue's own
employees crash four times in one day, and the company had to send
someone to fix a computer belonging to one of the company's venture
capital investors. Id.
---------------------------------------------------------------------------
\2\ On a separate note, I want to commend the New York Attorney
General's office for its recent ground-breaking settlements--which
included monetary relief--with Priceline, Travelocity, and Cingular
Wireless in the context of its litigation against DirectRevenue.
Among other things, the settlements require the companies to do due
diligence before advertising via adware, and periodically follow up
to see how their online ads are being delivered. These settlements
are important because advertising dollars fuel the demand side of
the nuisance adware problem by giving companies like DirectRevenue
and their affiliates and sub-affiliates the incentive to expand
their installed base, with or without consumers' consent.
---------------------------------------------------------------------------
I recognize that staff was able to negotiate comprehensive
injunctive relief that will halt these illegal practices once and for
all. The proposed order, among other things, requires DirectRevenue to
co-brand advertisements it serves and provide an effective method to
uninstall their software--steps that should allow consumers unhappy
with the pop-ups to identify their source and remove the software that
generates them. Other provisions ensure that consumers get to choose
whether they want the software in the first place. I also recognize
that, in litigating this matter, staff would have been presented with
novel issues that could pose risks.
That said, I cannot support a consent agreement that requires the
respondents--particularly Joshua Abram, Daniel Kaufman, Alan Murray,
and Rodney Hook, the officers and owners of DirectRevenue--to pay a
total of only $1.5 million. Venture capitalists poured more than $20
million into DirectRevenue,\3\ and between the companies' ad revenues
and the venture capital money, millions of dollars flowed into the
owners' pockets--$23 million, according to Business Week. See The Plot
To Hijack Your Computer, supra. Settlement always involves compromise,
and staff must weigh the advantages of a settlement with the risks and
costs of litigation. But in cases like this, I would rather go to trial
and risk losing than settle for a compromise that makes an FTC action
just a cost of doing business.
\3\ See, e.g., Brad Stone, Invasion of the PC Snatchers,
Newsweek (Dec. 13, 2006), available at http://www.msnbc.msn.com/id/6653413/site/newsweek/.
---------------------------------------------------------------------------
[FR Doc. E7-3058 Filed 2-22-07; 8:45 am]
BILLING CODE 6750-01-P