Stopping Spyware at the Source

By Cindy Skrzycki
Tuesday, March 6, 2007

During the past few months, the Federal Trade Commission has filed deceptive- advertising cases against two distributors of what is called adware or spyware. The insidious form of software subjects consumers and their computers to unwanted advertising and surveillance.

The five-member commission plans to escalate its attack by going after some of the big-name Internet advertisers that hire the online distributors.

"We need to stop the demand side of spyware," said Jon Leibowitz, one of the five commission members and a Democrat. "We will send letters to major corporations and entities that place the majority of these ads. This is a wake-up call to put them on notice. That would be a good way to choke off the money."

The FTC move, which follows action against three large advertisers taken by New York state in January, reflects efforts by authorities to clean up the growing market for Internet marketing.

Companies spent an estimated $16.1 billion advertising on the Web last year, up 32 percent from the year before, according to the Direct Marketing Association, a trade group. And consumers and computer companies spent $2.6 billion trying to block or remove spyware, Consumer Reports magazine said.

Consumers often download the troubling software after getting an Internet offer for a "free" product, such as music, screen savers or even anti-spam programs. The adware is then secretly installed and can track computer use, send barrages of pop-ups or even damage the computer.

Leibowitz said up to 200 advertisers will be warned to police where their ad dollars are going online. He said the commission doesn't plan to disclose which companies will get the letters.

New York Attorney General Andrew Cuomo led the way on "naming names." He announced on Jan. 29 that Cingular Wireless, and agreed to pay a total of $100,000 in fines to settle a spyware case involving a distributor called DirectRevenue.

The three companies said they no longer did business with DirectRevenue. Cingular, the Atlanta-based wireless unit of AT&T, the largest U.S. phone company, and Priceline, an online travel agency based in Connecticut, said they no longer used adware providers.

The FTC announced last month that DirectRevenue and four of its principals settled charges that they used unfair and deceptive methods to get consumers to download software and then obstruct them from removing it. The company agreed to return $1.5 million in "ill-gotten gains," stop future downloads without consumers' express consent, and provide a way to locate and remove the adware from computers.

Leibowitz wrote a dissent in the case, calling the $1.5 million payment "a disappointment because apparently it leaves DirectRevenue's owners lining their pockets with more than $20 million from a business model based on deceit."

The FTC penalized Zango of Bellevue, Wash., $3 million for deceptive advertising in November.

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