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7/31/2007
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Zango Denies Claim That It's Flouting FTC Agreement

Spyware researcher Ben Edelman charges that Zango, the adware company formerly known as 180solutions Inc., is distributing deceptive software without adequate consent or disclosure.

Zango, the adware company formerly known as 180solutions Inc., is distributing deceptive software without adequate consent or disclosure, as required under the terms of its agreement with the Federal Trade Commission, according to spyware researcher Ben Edelman.

"In my hands-on testing, Zango continues numerous practices likely to confuse, deceive, or otherwise harm typical users as well as practices specifically contrary to Zango's obligations under its November 2006 settlement with the FTC," Edelman said in a report released Tuesday.

Zango last year settled Federal Trade Commission charges that it "used unfair and deceptive methods to download adware and obstruct consumers from removing it, in violation of federal law."

The FTC alleged that Zango used third-party affiliates to install adware on consumers' computers to display pop-up ads without adequate notice, sometimes through security exploits. In addition, the FTC claimed that Zango deliberately made its software difficulty to find and remove.

Zango emphatically denies Edelman's charges and insists that it remains in full compliance with its FTC agreement. "It's an absolutely unfair characterization of what's going on," said Ken McGraw, Zango's EVP, general counsel and chief compliance officer. "Zango is 100% in full compliance with the FTC consent order. While we haven't had a chance to look at his allegations in detail, all of them appear to be unfounded, inaccurate, or misleading."

The issue is that some of the software Edelman analyzes is not covered by the consent order, said McGraw. And for applications that are covered, McGraw contends Edelman manipulates the screenshots "to make it appear as something that doesn't really exist in the real world."

"One has to wonder what the purpose is to saying there's non-compliance with something that isn't subject to the compliance order," asks Richard Purcell, CEO of the Corporate Privacy Group and a consultant who certified Zango's consent order compliance to the FTC.

The software covered under the agreement is Zango's Search Assistant and Toolbar software, Purcell said. Edelman "is talking about Hotbar here and in fact the Hotbar installation is specifically called out as not being part of the settlement," said Purcell.

In a November, 2006 interview with InformationWeek following the announcement of the FTC settlement, Zango CEO Keith Smith sounded contrite. He acknowledged that pop-up ads -- at least "traditional" ones, which may be distinct in his mind from the ones Zango delivers -- are problematic and distanced his company from the actions of its affiliates. "The traditional pop-up is typically a terrible experience for consumers," he said.

Yet, Zango continues to deliver that experience to consumers, according to Edelman, who points to "ongoing Zango-designed installation sequences which install Zango pop-up ad software without any on-screen disclosure of material terms" and other pop-up ads that violate the FTC settlement requirements.

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