FTC Settles With Advertiser for Spam Campaign

An online advertiser that drove traffic to its Web sites by sending out spam with misleading subject lines has agreed to settle a U.S. Federal Communications Commission complaint charging that it failed to tell consumers they had to spend money to receive so-called free products, the FTC announced Wednesday.

The settlement requires Member Source Media to disclose the costs and obligations associated with the advertised products and services, and bars the company from sending e-mail that violates the CAN-SPAM Act, which regulates the sending of unsolicited e-mail. The company must also pay US$200,000 in civil penalties, according to the settlement approved Wednesday in the U.S. District Court for the Northern District of California.

Member Source Media — doing business as ConsumerGain.com, PremiumPerks.com, FreeRetailRewards.com, and GreatAmericanGiveaways.com — and the company’s owner, Chris Sommer, used deceptive spam and online advertising to lure customers to its Web sites, the FTC alleged.

The company used e-mail subject lines such as, “Congratulations. You’ve won an iPod Video Player,” “Here are 2 free iPod Nanos for You: confirm now,” and “Second Attempt: Target Gift Card Inside,” the FTC said in a press release. The company’s Web-based ads contained similar offers: “CONGRATULATIONS! You Have Been Chosen To Receive a FREE GATEWAY LAPTOP.”

When consumers arrived at Member Source Media’s Web pages, they were led through a series of ads for goods and services from third parties.

To qualify for their “free products,” consumers would have to first wade through pages of “optional” offers. Once they navigated those pages, they had to participate in a series of third-party promotions requiring them to do things such as purchase products, subscribe to satellite television service, or apply for multiple credit cards, the FTC said.

Member Source Media’s failure to disclose material facts was deceptive and violated the FTC Act, the FTC said. In addition, the agency charged that deceptive subject lines in Member Source Media’s spam e-mails violated the federal CAN-SPAM Act.

The settlement requires that Member Source Media clearly disclose in its ads and on its Web pages that consumers have to spend money or incur other obligations to qualify for a free product or service. The settlement also requires the company to provide a list of the obligations a consumer is likely to incur to qualify for their chosen item — such as applying for credit cards or purchasing products.

By Grant Gross, IDG News Service (Washington Bureau)