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FTC Halts "Free Software CD" Internet Scam

January 27, 2007

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A United States Magistrate has temporarily halted the marketing practices of a company that advertised "free software CDs" but allegedly billed consumers' credit cards for them without the consumers' authorization.

The Federal Trade Commission asked the court to bar the deceptive advertising and order redress for tens of thousands of consumers who were wrongfully billed by Think All Publishing, L.L.C.

According to the FTC, the scheme worked like this: The defendants' Web site offered consumers a free CD containing computer software if they agreed to pay a shipping and handling fee of $1.99 to $2.99.

Consumers who signed up for the free CD were then offered three more free software CDs for no additional shipping or handling fees. The consumers provided their names and addresses and a credit or debit card number online.

Before completing the transaction, the consumers checked a box saying they agreed to the "terms of use." The "terms of use" detailed computer software licensing arrangements and usage rules, and many consumers checked the box without clicking on the hyperlink or without reading the entire form.

Buried in the seventh paragraph of the fourteen-paragraph, single-spaced document is language that contradicts the free software claim.

It states that consumers must send back two of the four "free" CDs within 10 days or they will be charged a fee of $39 or $49. It also states that consumers will be enrolled in a software continuity program, will receive CDs they didn't order in the future, and will be charged $39 to $49 for those CDs unless they return them within 10 days.

The FTC charged in its complaint that most consumers did not know about the charges or continuity plan until they were billed. According to the agency, because the defendants did not adequately notify consumers, they could not avoid the charges.

The FTC accused the defendants of unfair and deceptive practices that violate the FTC Act and violating the Unordered Merchandise Statute, which prohibits billing recipients for merchandise they did not order. It asked the court to order a halt to the unfair and deceptive practices and to order the defendants to give up their ill-gotten gains.

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