According to the FTC, the defendants, through their telemarketing operations, called consumers touting the business benefits of having an Internet presence and offered to design and host an Internet web site for a "free" 30-day trial period. The FTC charged that the telemarketers failed to disclose to consumers that, unless consumers initiate the contact to cancel the service, the defendants would automatically begin charging consumers monthly fees of $19.95 or $24.95.

Consumers were never told, the FTC's complaint alleges, that these charges for Internet-related services would be added to their local phone bills. The agency alleges that the scam has taken in more that $9 million for services that were never ordered. The FTC has asked the court to issue a preliminary injunction to prohibit the alleged deceptive practices pending the outcome of a trial, and to order an asset freeze against the defendants to preserve funds for consumer redress.

"These defendants were involved in a big-league deception," said Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection. "They threw consumers a curve ball and expected to strike it rich. But as consumers know full well, cramming is scamming and now, the FTC has asked the court to say the game is over."

This case represents the eighth FTC cases involving "cramming" since March 1998. The case was filed in conjunction with the Office of the Attorney General of Minnesota, which filed a separate action, and the Wisconsin Department of Agriculture, Trade and Consumer Protection and Office of the Wisconsin Attorney General, both of which assisted in this case.

The FTC's complaint names as defendants: WebValley, Inc., Profile National Business Directory, Inc., and National Business Directory, Inc., all based in Hopkins, Minnesota; Protel Advantage, Inc., U.S. Protel, Inc., both located in St. Paul. The individuals named by the FTC are Satya P. Garg, owner and president of WebValley, and an owner of Profile, and National; Blaine C. Christofferson, an officer of U.S. Protel, and Scott D. Lee, president of Protel Advantage.

According to the FTC complaint, consumers who were not interested in receiving the defendants' Internet-related services believed that they could simply let the trial period expire without taking affirmative steps to cancel the services. The complaint alleges that, once the trial period expired, the defendants automatically billed consumers on a monthly basis via their telephone bills, without authorization. In numerous instances, according to the complaint, consumers did not notice the unexpected placement of the charges on their phone bills and inadvertently paid the charges for many months.

Further, the FTC charged that the defendants, in numerous instances, told consumers that they were legally obligated to pay for Internet-related services charged to consumers' phone bills, when in fact, consumers were not legally obligated to pay the charges because consumers never authorized them.

In addition to requesting a preliminary injunction, the FTC also has asked the court to appoint a receiver to take over the defendants' operations, and to ultimately order a permanent injunction and redress for consumers. In addition to the law enforcement initiative, the FTC has joined with the Small Business Administration, the Council of Better Business Bureaus, the American Chamber of Commerce Executives, the Yellow Pages Publishers Association and the National Federation of Independent  Businesses to launch an education campaign.

The FTC's Business Alert, "Website Woes: Avoiding Web Service Scams," highlights some common web service scams and offers tips on what small businesses can do to protect themselves, including:

Know your rights.
If you receive bills for services you didn't order, don't pay. The law allows you to treat unordered services as a gift. Review your phone bills as soon as they arrive. Be on the lookout for charges for services you haven't ordered or authorized Assign purchasing to designated staff. And document all your purchases. Train your staff in how to respond to telemarketers.

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