Current Events in September 1999

WASHINGTON, Sept. 23, 1999 -- The Federal Trade Commission has asked a U.S. District Court Judge to halt a Internet scam that clones everyday Web sites and uses the copycat sites to barrage unsuspecting consumers with pornography.

According to the agency, the scammers copy existing Web sites and insert coded instructions in the copycat sites which automatically redirects unwitting consumers to adult sites operated by the defendants. Then the scammers disable the browser's "back" and "exit" commands so that Internet surfers trying desperately to escape the pornographic images face screen after screen of similar material and advertisements for other adult sites.

The FTC obtained a preliminary injunction from the United States District Court for the Eastern District of Virginia and is seeking a court order to permanently purge this scam from the Internet.

"These operators high-jacked Web sites, 'kidnapped' consumers and held them captive," said Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection.

"They exposed surfers, including children, to the seamiest sort of material and incapacitated their computers so they couldn't escape. They copied as many as 25 million Web pages from sites as diverse as the Harvard Law Review and the Japanese Friendship Garden."

"When consumers used search engines to find subjects as innocent as 'kids on the net,' 'news about Kosovo,' or 'wedding services,' they risked being exposed to a torrent of tawdry images. This scam is outrageous and we want it off the Internet. We're confident the court will help us arrange that," Bernstein said.

Bernstein explained the scheme at a press conference in Washington, D.C. where she also announced the FTC's new high-tech Internet Lab that will assist the agency's investigators as they search for fraud and deception on the Web.

According to the complaint, in a practice called "pagejacking," the defendants made exact copies of Web pages posted by unrelated parties, including the imbedded text that informs search engines about the subject matter of the site.

Then they made one change that was hidden from view: they inserted a command to "redirect" any surfer coming to the site to another Web site that contained sexually-explicit, adult-oriented material. Internet surfers searching for subjects as innocuous as "Oklahoma tornadoes" or "child car seats" would type those terms into a search engine and the search results would list a variety of related sites, including the bogus, copycat site of the defendants.

Surfers assumed from the listings that the defendants' sites contained the information they were seeking and clicked on the listing. The "redirect" command imbedded in the copycat site immediately rerouted the consumer to an adult site hosted by the defendants. Once there, consumers were victimized by another scam. The defendants "mouse trapped" consumers by incapacitating their Internet browser's "back" and "close" buttons, so that while they were trying to exit the defendants' site, they were sent to additional adult sites in an unavoidable, seemingly endless loop.

Bernstein speculated that the high rate of traffic generated by the "kidnapped" surfers allowed the defendants to charge premium prices for the banner ads displayed at their site. In addition, the defendants may have received income from diverting surfers to other adult oriented Web sites.

-- Unilever has agreed to settle Federal Trade Commission charges that it did not have adequate substantiation for advertising claims for its Vaseline Brand "Intensive Care Anti-Bacterial Hand Lotion (VICAL)."

Unilever advertised VICAL as a hand lotion that "stops germs longer than washing alone." The ads also claimed that VICAL provides enough germ protection to "stop germs for hours."

The proposed settlement would prohibit Unilever from making claims about any antimicrobial product unless it possesses scientific substantiation.

"No marketing claims will wash without adequate substantiation. That's the law," said Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection.

"And right now, there's simply no evidence that using anti-bacterial lotion reduces the incidence of any disease. We want consumers to know that washing well with soap and water is as good as it gets when it comes to warding off disease causing germs and protecting themselves from colds and flu."

Unilever, based in New York, ran ads for VICAL that were widely disseminated throughout the country. The advertisements appeared on television, in magazines, on the radio and in newspaper inserts. The ads contained statements such as:

• "NEW VaselineBrand Intensive Care Lotion Anti-Bacterial Hand Lotion STOPS GERMS LONGER THAN WASHING ALONE"
• "Arm your hands With The Only Hand Lotion That HEALS DRYNESS With Proven Vaseline Moisturizers And Stops Germs For Hours."

The FTC alleged that by making such claims, Unilever is deceiving consumers into believing that by using VICAL, they will be shielded from disease-causing germs.

According to the complaint, the degree and duration of the lotion's effectiveness have not been scientifically established. In addition, it is noted that VICAL's active ingredient is "triclosan" - an anti-bacterial ingredient used in many consumer products. According to the complaint, triclosan has not been proven effective against viruses - the cause of the most common diseases suffered by consumers, including colds or influenza.

The proposed consent agreement would prohibit Unilever from making any claims that VICAL or any antimicrobial product is as effective as, or more effective than, washing alone in protecting users against germs; has a continuous effect against germs; has any effect on any specific germ; or treats, cures, alleviates the symptoms of, prevents, or reduces the risk of developing colds, allergies, influenza, food-borne illnesses or any other disease or disorder, unless they possess competent and reliable scientific evidence.

The proposed order would not apply to any product sold or distributed to consumers by third parties under private labeling agreements with Unilever, provided Unilever does not participate in any manner in the funding, preparation or dissemination of the product's advertising.

According to the FTC, the companies misrepresented their identities to consumers while telemarketing their "services," misled consumers by telling them that they were not currently protected against credit card fraud, and claimed that if the consumers did not purchase their services they could be held fully liable for all unauthorized charges made with their cards. Finally, two of the companies posted unauthorized charges to consumers' credit card accounts.

"Under federal law, the maximum amount for which a consumer can be held liable for charges they didn't authorize is $50," Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection said.

"These companies took advantage of students, seniors, and others scared into thinking they were vulnerable. The consumers were misled by telemarketers, spent their hard-earned money and got nothing in return."

Also as part of the sweep announced today, the FTC implemented a major consumer education campaign designed to alert consumers of their credit card rights. This campaign includes the distribution of a Consumer Alert fact sheet that provides important information on credit card loss protection offers, along with a brochure and bookmark with information on fair credit billing and a cooperative effort with the AARP, which plans to make credit card loss protection its primary education effort for the month of September. 

In addition, in an attempt to reach out to college students who may be receiving their first exposure to credit cards, the FTC is currently working with the National Association of College Stores (NACS) to distribute over one million of the Credit Rules bookmarks along with students' book purchases. 

According to the FTC complaints, the companies used telemarketers to contact consumers offering what they claimed was credit card protection against loss, theft or Y2K-related problems. To avoid the perception that the company was making "cold calls," the telemarketers allegedly told consumers that they were calling from Visa or Mastercard, depending on which credit card the consumer had. 

They then said that criminals have been stealing credit card numbers via the Internet or other technology, and that consumers need additional protection because they are not currently covered against unauthorized use. 

The complaints allege that the companies claimed that the service they were providing would protect consumers from liability due to unauthorized credit card charges. 

Finally, in other instances, the telemarketers claimed that because of the Y2K computer bug, consumers would be exposed to credit card fraud, which could be prevented by purchasing similar protection services. In fact, federal law limits loss due to unauthorized credit card charges to $50 (a fee that is sometimes waived by the credit card company).

Further, the complaints allege that the telemarketers persuaded consumers to divulge their complete credit card numbers by reciting parts of their credit card numbers and requesting the remainder or by claiming to be verifying the consumers' identification or to be changing "security codes" on the consumers' credit cards. Using the credit card numbers, the complaints allege, the companies caused charges to be posted on the consumers' credit card bills without their consent or charged consumers fees ranging from approximately $200 to $400 for protection "services" that did not exist.

The FTC filed its actions in its Credit Card Protection Sweep against:

Source One Publications, Inc., an Arizona corporation; and Courtney Wiggs, individually and as an officer of Source One Publications, Inc. For alleged violations of the Federal Trade Commission Act (FTC Act) and the FTC's Telemarketing Sales Rule (TSR), the Commission is seeking to obtain a preliminary injunction, permanent injunctive relief, consumer redress recission or reformation of contracts, and other equitable relief; 

Liberty Direct, Inc., and The Ascendix Group, Inc., Arizona corporations; and Paul L. Wiggs and David C. Furnia, individually and as officers of Liberty Direct, Inc. and The Ascendix Group, Inc. For alleged violations of the FTC Act and the TSR, the Commission is seeking to obtain permanent injunctive relief, consumer redress, recission or reformation of contracts, and other equitable relief; and 

Credit Mart Financial Strategies, Inc., and Maurice Verrelli, individually and as an officer of Credit Mart Financial Strategies, Inc. for alleged violations of the FTC Act and the TSR. In this matter, a stipulated consent decree has been reached that will provide for settlement of the Commission's charges, injunctive relief and the payment of $100,000 in consumer redress by the defendants.