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, consumer - many of them operating small businesses
on the Internet - received unsolicited fax solicitations stating,
"URGENT NOTICE OF IDENTICAL DOMAIN NAME APPLICATION BY A THIRD
PARTY." The solicitation warned that an application for a domain
name almost identical to the recipient's has been "submitted
to the National Domain Name Registry (NDNR) for registration"
by an unidentified third party. For example, the FTC alleged the
defendants told the owner of a site "www.sobi-sky.org"
that an application had been submitted to obtain the domain name
"www.sobi-sky.net." The solicitation continued, "Consequently,
it is our opinion that this application may have been submitted
in bad faith ..." The solicitation listed four reasons someone
might want a copy-cat domain name, including "disrupting the
business of a competitor," or intentionally attempting to lure
the customers of another business by creating a confusingly similar
Web address. The fax solicitation offered to block the application
by obtaining the copy-cat domain name for the fax recipient for
a fee of $70. It warned that, if the consumer fails to act, "NDNR
WILL NOT BE LIABLE FOR THE LOSS OF DOMAIN NAME LICENSE, IDENTICAL
OR CONFUSINGLY SIMILAR USE OF YOUR COMPANY'S NAME; OR INTERRUPTION
OF BUSINESS ACTIVITY OR BUSINESS LOSSES."
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