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8/16/2006
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FTC, AG Blame 'Extortionware' For Pop-Up Hell

Authorities say users were inundated with pop-ups that demanded payments and couldn't be closed. Thousands of complaints flooded into regulators' offices.

The Federal Trade Commission and the state of Washington have sued a group of companies and individuals for delivering so-called "extortionware," barrages of pop-up ads that demand payment to make the distracting displays go away, the pair announced this week.

In a statement Tuesday, the FTC outlined its complaint, which was submitted to a Los Angeles federal court last week. Washington filed its lawsuit on Monday with a King County court in Seattle, claiming that the companies violated the state's anti-spyware laws.

According to the FTC and Rob McKenna, Washington's attorney general, the defendants pushed a movie download service from sites including Movieland.com, Popcorn.net, and Moviepass.tv, all of which offered a three-day free trial. After that, however, things get ugly.

"Consumers are inundated with pop-ups that appear at least hourly and subject the consumer to a 40-second payment demand that cannot be closed," said McKenna in a statement e-mailed to TechWeb. "Thousands of consumers nationwide have complained to my office, the Federal Trade Commission, the Better Business Bureau, and others about the defendants' unfair practices," he added. Consumers forked over between $20 and over $100 to get the pop-ups to stop.

The FTC said that the sites were also blasting pop-ups to users who said they had never signed up for the service's trial offer. "Most [consumers] claimed they had never signed up for the 'free trial, never used Movieland's services, and never even heard of Movieland until they got their first demand for payment."

Both McKenna and the FTC alleged that the pop-ups were virtually impossible to remove. "Consumers attempting to remove [the software] through the Windows Control Panel Add/Remove function were redirected to a Web page telling them that they had to pay $29.95 to stop the pop-ups," said the FTC.

"We've seen similar schemes before, but nothing quite as extortionist," said Richard Stiennon, principal analyst at Michigan-based IT-Harvest, and formerly the director of research at anti-spyware vendor Webroot. "Usually this kind of thing, ransomware, extortionware, whatever you want to call it, is used by rogue spyware software that tells you to pay up because you're supposedly infected.

"But this buy-through-annoyance tactic is new."

The FTC was unable to convince the court to issue an temporary restraining order against the Web site operators, so the services remain online. All three named in the lawsuit -- Movieland.com, Popcorn.net, and Moviepass.tv -- use nearly the same language in their "Terms & Conditions" statements in an attempt to deflect criticism of pop-ups.

"If you do not either cancel or provide payment information during the trial period our billing software will be enabled upon the expiration of your trial period," the terms posted on Moviepass.tv read. "The billing software will run on your computer, displaying pop-up window reminders that provide you with various methods of payment for the annual license. These pop-up windows will appear more frequently until you choose one of the payment options and pay for the license."

Washington's McKenna rejected that defense. "The defendants' claim that users are legally obligated to pay for their service lacks merit because consumers did not provide knowing consent to the installation of the relentless pop-up demands," he said.

McKenna cited Washington's anti-spyware law, which has been used only once before, as the basis for his lawsuit. Among other things, the law bans software from taking control of a consumer's computer and making it difficult to remove a program.

The FTC said that a trial would be slated at a later date. McKenna added that if found guilty, the defendants could be fined as much as $100,000 per violation.

"This may be new, but it's not surprising," said Stiennon. "Marketers will stoop to anything these days. All they have to do is say 'Let's do this, have them click a button,' and all of a sudden they're making money."

Complaints filed by the FTC and Washington state can be downloaded in PDF format from the Web.

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