Domain Name Registrars Settle FTC Charges
Alleged Bogus Claims Duped Consumers Into Buying Variations on Their
Own Domain Names
A Canadian company and its principal have agreed to pay $375,000
in consumer redress to settle Federal Trade Commission charges that
their domain name sales scheme violated federal laws. The settlement
will bar the defendants from making false or misleading statements
in the sale of goods or services related to domain names, e-mail
or Web-hosting services; bar them from using unsolicited faxes for
marketing; and bar them from violations of the Telemarketing Sales
Rule (TSR).
In February 2001, the FTC alleged that the defendants duped consumers
into needlessly registering variations of their existing domain
names by deceptively contending that third parties were about to
claim them. At the agency's request, a U.S. District Court issued
a temporary restraining order, froze the defendants' assets, and
shut down their Web sites, pending trial. The FTC asked the court
to bar the scheme permanently and order consumer redress. The settlement
announced today ends the court action.
According to the FTC, no third party had applied for the domain
names, and the information in the fax solicitations was false, in
violation of the FTC Act.
The settlement will bar the defendants from making false or misleading
statements during the sale of goods or services related to domain
names, e-mail, or Web-hosting. It will bar the defendants from using
unsolicited faxes to market any goods or services and bar them from
violating the TSR. It also will require the defendants to provide
domain-name registrations for the full terms originally purchased
by consumers. In addition, the settlement will require that the
defendants tape record all outbound telemarketing sales calls made
in the United States. Under the terms of the settlement, the defendants
will pay $350,000 in consumer redress to U.S. and Canadian consumers
and $25,000 toward costs to administer the redress fund. Finally,
the settlement contains record-keeping requirements to allow the
FTC to monitor the defendants' compliance with the order.
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