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A federal trial court in Nevada on April 16 granted a temporary restraining order in the case FTC v. BTV Industries, enjoining an apparent e-mail scam that offered free video-game consoles but instead routed people to a pornography Web site charging $3.99 per minute. The alleged “bait-and-switch” e-mail scheme landed in court thanks to a new International Netforce composed of the Federal Trade Commission, eight state law enforcers in the United States and four Canadian agencies. The Netforce, described in an April 2 FTC press release as an “initiative targeting deceptive spam and Internet fraud,” appears to be using cases like BTV Industries to demonstrate it intends to take a hard line on deceptive Web practices. THE E-MAIL MESSAGES The FTC claims that the BTV Industries case deals with a serious bait-and-switch scheme, and facts appear to support that claim. According to the FTC, consumers received unsolicited spam e-mail messages claiming that the recipients had won a free Sony PlayStation 2 or other prize through a promotion supposedly sponsored by Yahoo. In fact, the e-mail messages directed consumers to an adult Internet site through a 900-number modem connection that charged up them up to $3.99 per minute of use. Apparently, when consumers responded to the e-mail informing them that they had won the game system, they then were routed to a Web page that imitated an authentic Yahoo page. That page then instructed consumers to download a program that would purportedly permit them to connect to a “toll-free” Web site where they could enter their name and address to request a PlayStation. Yet, when consumers adhered to these instructions, they were connected to a pornographic site by way of a 900-number, where they then incurred per-minute charges. THE FTC COMPLAINT The FTC filed a complaint in federal court in Nevada on March 27 against the alleged perpetrators. The complaint named as defendants Rick Covell, Adam Lewis, BTV Industries, National Communications Team Inc., LO/AD Communications Corp. and Nicholas Loader. The FTC argued that the defendants violated the FTC Act and the Pay-Per-Call Rule, which implements the requirements of the Telephone Disclosure and Dispute Resolution Act of 1992. In essence, the FTC asserted that the practices of the defendants were deceptive and designed to mislead consumers with respect to supposedly winning a prize, Yahoo purportedly sending the e-mail, and the connection supposedly being toll-free. Furthermore, the FTC argued that the defendants improperly did not disclose the cost of connecting to the Web site and did not provide an audio introductory disclosure message when consumers connected via the 900-number. The complaint sought a permanent injunction barring the alleged scam. TRO GRANTED In an order dated April 16, the federal court in Nevada granted a request for a temporary restraining order by the FTC. As part of that order, the court temporarily enjoined any further misrepresentations, violations of the Pay-Per-Call Rule, billing for unauthorized calls, the freezing of assets and other relief. The court set up further proceedings for the defendants to dispute, if they can, why a preliminary injunction should not issue against them pending a final trial ruling. It is quite likely that the temporary restraining order will form the basis for a preliminary injunction and the ultimate final trial result, assuming the matter does not settle before then. From what is known so far, it would not be surprising if this matter were to settle with a consent decree being entered into between the defendants and the FTC establishing the requirements that must be followed by the defendants. MORE TO COME The FTC complaint in this case is one of 63 actions commenced as part of the Netforce law enforcement effort against a wide range of alleged Internet scams. Partners in the International Netforce include the Alaska Attorney General, the Alaska State Troopers, the Alberta Government Services, the British Columbia Securities Commission, the British Columbia Solicitor General, Canada’s Competition Bureau, the Federal Trade Commission, the Idaho Attorney General, the Montana Department of Administration, the Oregon Department of Justice, the Washington Attorney General, the Washington State Department of Financial Institutions and the Wyoming Attorney General. The Netforce has already sent out more than 500 letters warning people sending deceptive spam that it is illegal — which means we can expect to see more enforcement actions on the horizon. Eric Sinrod is a partner in the San Francisco office of the international law firm Duane Morris, where he focuses on technology and litigation matters. He can be reached at [email protected] and his Web site is www.sinrodlaw.com.

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