October 21, 2005
The state of New York has reached an agreement with the former CEO of a leading Internet marketing company responsible for secretly installing adware and spyware on millions of home computers.
Under the agreement, Brad Greenspan, the founder and former CEO of Intermix Media, will pay $750,000 in penalties and disgorgement in connection with an investigation of the conduct of his former company.
"Internet marketing companies have gotten away with unethical and illegal software downloading practices for too long," Attorney General Eliot Spitzer said. "This agreement sends a message that intrusive and deceptive practices will not be tolerated."
In April, Spitzer sued the Los Angeles-based Intermix alleging that it was responsible for downloading intrusive software tens of millions of times to computers nationwide, and more than three million times to New Yorkers.
The agreement between Spitzers office and Greenspan, an Assurance of Discontinuance, contains a factual recitation alleging that Greenspan directed Intermixs employees to bundle adware programs with other free software programs to avoid informing consumers of their existence by disclosing Intermixs adware programs only in a linked, inconspicuous, "End User License Agreement."
The assurance also describes how Greenspan directed subordinates to bundle the adware programs to make them difficult to uninstall.
In practice, the companys adware programs often did not fully uninstall, or reinstalled themselves after having been removed. Likewise, Intermixs programs often were designed to be listed only in inconspicuous computer files, thus further avoiding detection by consumers.
Spitzer also announced that New York Supreme Court Judge Judith Gische had approved a consent agreement between Intermix and Spitzers office requiring Intermix to pay $7.5 million in penalties and disgorgement, and accept a ban on the distribution of adware programs in the future. That agreement followed the lawsuit filed in April of 2005.
Intermix affiliate Acez Software has also resolved an investigation by the Attorney Generals office of its bundling of Intermix adware with free Acez screensavers without providing notice to consumers.
Acez agreed to pay $35,000 in penalties and disgorgement and to adhere to fair notice and disclosure standards.
The United States Senate and House of Representatives have been considering various laws that would apply particular disclosure requirements to "adware" and "spyware" purveyors.
However, Spitzers office alleged wrongdoing in the above cases under traditional state "deceptive practices" and "false advertising" laws, contained in the New York General Business Law.
