Internet Advertiser Settles With FTC

Online advertiser Adteractive is hit with a $650,000 fine for promoting free gifts that were anything but that.

An online advertiser touting free electronics products agreed Nov. 28 to pay a $650,000 civil fine for misleading consumers. A Federal Trade Commission complaint charged that Adteractive failed to disclose that consumers have to spend money to receive the so-called "free" gifts it offers.

According to the FTC, Adteractive—doing business as and—used deceptive spam and online advertising to lure consumers to its sites. The settlement, filed by the Department of Justice on behalf of the FTC, also requires Adteractive, of San Francisco, 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 FTC claims 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." Ateractives banner ads and pop-up ads contained similar claims.

However, according to the FTC, when consumers arrived at Adteractives promotional sites, they were led through a series of ads for goods and services from third parties. In fact, the FTC said, for consumers to qualify for the purported free gifts, they were required to participate in promotions requiring consumers to purchase products, take out a car loan, subscribe to satellite television services or apply for credit cards.


To read about the FTCs claims that 8 million people were victims of ID theft in 2005, click here.

In its complaint, the FTC claimed Adteractives failure to disclose material facts such as requirements to pay or provide other consideration to obtain the gifts is a deceptive practice under the FTC Act. The agency also charged that the deceptive subject lines are a violation of the CAN SPAM Act.

The settlement mandates Adteractive to clearly and conspicuously disclose in its ads and on its promotional pages that consumers have to spend money or incur other obligations to qualify for a gift or prize. The settlement also requires the company to provide a list of the obligations a consumer is likely to incur to qualify for their chosen gift.


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