FTC Settles With Alleged Spyware Operation

A Nevada company will pay US$330,000 to settle a complaint from the U.S. Federal Trade Commission that it hid spyware in other software consumers could download for free, the FTC announced Monday.

The FTC accused ERG Ventures LLC of distributing spyware that infected 15 million computers. The company tricked consumers into downloading spyware by hiding the Media Motor program in other downloads for other software, including screensavers and video files, the FTC said in an October 2006 complaint.

Media Motor, once downloaded, added software that changed consumers’ home pages, tracked their Internet activity, altered browser settings, degraded computer performance and disabled antispyware and antivirus software, the FTC said. Much of the malware installed by the Media Motor program was extremely difficult or impossible for consumers to remove from their computers, the agency said.

Microsoft Corp. filed a lawsuit against the company last November, seeking monetary damages for distributing spyware.

ERG Ventures does not have a telephone listing for the Reno, Nevada, address identified by the FTC. The company does not appear to have a Web site. A separate company, ERG Ventures Co. Ltd., based in Japan, formerly sold video monitors in the U.S.

The FTC settlement, approved last week by the U.S. District Court for the District of Nevada, bars ERG Ventures of Nevada and its owners from installing software that interferes with consumers’ computer use and from making false or misleading claims. The settlement also prohibits the defendants from distributing software that generates disruptive pop-up advertising, and tampers with or disables other installed programs.

In addition, the company must give up $330,000 in profits from its alleged spyware operation. If the court finds that the defendants misrepresented their financial condition, they will owe nearly $3.6 million, the total revenue from the alleged scam, the FTC said.

The FTC charged that ERG Ventures and its owners violated the FTC Act, which bars unfair and deceptive practices. The defendants failed to disclose to consumers that the free software they offered was bundled with malware, the FTC said.

The agency also charged the defendants with using a deceptive end user license agreement, which gave consumers the option to halt the installation of all software from ERG Ventures, but secretly installed malware whether consumers accepted or rejected the terms of the agreement. The agency also charged the defendants with unfairly downloading software that causes substantial harm to consumers.

At the request of the FTC, the Nevada froze the defendants’ assets and ordered a halt to their spyware operation last November.

The settlement names ERG Ventures, as well as Elliott S. Cameron, Robert A. Davidson II and Garry E. Hill, doing business as Media Motor, Joysticksavers.com and PrivateinPublic.com.

By Grant Gross, IDG News Service (Washington Bureau)