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'Free Gifts' Weren't Free; Spammer Pays the Price

Adteractive lured consumers with phony offers, feds charge

May 29, 2007

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A large online advertiser that drove traffic to its Web sites using spam e-mails with misleading subject lines has agreed to settle Federal Trade Commission charges that it failed to disclose that consumers have to spend money to receive the so-called "free" gifts it offers.

The settlement requires Adteractive, Inc., doing business as FreeGiftWorld.com and SamplePromotionsGroup.com, to disclose the costs and obligations to qualify for the advertised "gifts," and bars it from sending e-mail that violates the CAN-SPAM Act.

The settlement also requires that the company pay $650,000 in civil penalties.

According to the FTC, the company used deceptive spam and online advertising to lure consumers to its Web sites. For example, Adteractive used e-mail subject lines such as, "Test and keep this Flat-Screen TV," "Test it -- Keep it -- Microsoft Xbox 360," and "Congratulations! Claim Your Choice of Sony, HP or Gateway Laptop." Similarly, Adteractive's banner ads and pop-up ads contained claims such as, "Participate Now and You'll Receive a FREE SONY PLAYSTATION."

When consumers arrive at Adteractive's promotional Web pages, they are led through a series of ads for goods and services from third parties. To "qualify" for their "free gifts," consumers must first wade through pages of "optional" offers.

If they clear this hurdle, they discover that they must "participate in" a series of third-party promotions. Participation in these promotions requires consumers to do such things as purchase products, take out a car loan, subscribe to satellite television service, or apply for multiple credit cards.

The FTC maintains that Adteractive's failure to disclose material facts -- such as the fact that consumers must pay money or provide some other consideration to obtain their "free gift" -- is deceptive in violation of the FTC Act. In addition, the agency charged that deceptive subject lines in Adteractive's spam e-mails violate the federal CAN-SPAM Act.

The settlement requires that Adteractive clearly and conspicuously disclose in its ads and on its promotional Web pages that consumers have to spend money or incur other obligations to qualify for a gift or prize. The settlement also requires it to provide a list of the obligations a consumer is likely to incur to qualify for their chosen gift -- such as applying for credit cards, purchasing products, or obtaining a car loan.

In addition, the settlement bars future violations of the CAN-SPAM Act and requires Adteractive to pay a $650,000 civil penalty. Finally, the settlement contains bookkeeping and record-keeping provisions to allow the agency to monitor compliance.

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