Are Pop-Up Ads Unfair Competition?

Is adware just another way to compete? Online retailer SmartBargains paid adware purveyor Claria to deliver pop-up ads to consumers when they were about to make a purchase at rival Overstock.com. That infuriated Overstock executives. But, instead of taking action against Claria, Overstock in 2004 sued SmartBargains under Utah's anti-spyware law. Last month, a state judge rejected SmartBargains' attempt to dismiss the case. The discovery phase of the suit should begin shortly.

Jonathan Johnson, Overstock's senior VP of corporate and legal affairs, says he has no problem with adware knowingly being placed on users' computers, even if it means ads could influence shoppers to go elsewhere to buy merchandise. But he believes many Utah online shoppers didn't consent to having the software installed on their computers. "Anytime that a competitor's ads pop up over our copyrighted material in our store, that's just not fair competition," Johnson says. "It's our space, and competitors shouldn't occupy our Web site."

If found liable, SmartBargains could be fined $10,000 for each instance of a pop-up ad appearing on a screen of Overstock shoppers who didn't agree to have the adware installed on their PCs.

Is SmartBargains still targeting Overstock customers? Neither side will say. SmartBargains executive VP and CFO Ted McNamara won't say whether the company uses adware and declines to comment on the case. And Overstock has stopped monitoring the situation as closely as it did two years ago. "If it's going on, it's going on at a much smaller extent," Johnson says. "But we'll find that out in discovery."

Photo illustration by Anastasia Vasilakis

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