• by Wendy Davis  @wendyndavis, August 10, 2010

The Federal Trade Commission said this week that it has obtained a court order banning a Toronto-based operation from cheating small businesses by offering phony domain registration and search engine optimization services.

The Canadian company, known by various names including Internet Listing Service Corp., allegedly mailed small businesses notices that looked like invoices for the renewal of their domain names, according to the FTC's complaint. The mailing had a disclosure stating it was a solicitation, not a bill, but the FTC said the statement was "inconspicuously placed in the middle of the back page of the document" and that many recipients didn't see it.

Internet Listing Service Corp. also allegedly promised small business owners that it could "direct mass traffic" to their sites by submitting them to 25 search engines and directories four times a year.

The FTC alleged that such promises spurred companies to purchase search engine optimization services from Internet Listing Service Corp., even when they realized that the company wasn't a legitimate domain name registrar.

Overall, the FTC alleged, "thousands" of small businesses, nonprofits and consumers paid fees ranging from $35 to $75 for the phony domain registration and search engine optimization services.

The order obtained by the FTC bans Internet Listing Service Corp. and several company principals from alleging that they are owed money by consumers, will provide continued domain name registration for consumers, and will provide search optimization services that will substantially increase traffic.

The court order, signed by U.S. District Court Judge Robert Dow in the Northern District of Illinois, also directs the Canadian company to destroy information about the businesses that paid for its services.

Dow also found that the monetary damages caused by the scam totaled approximately $4,261,876. Dow entered a judgment for that amount, but suspended all but $10,000 of it for most of the company principals. Dow ordered only defendant, Steven Dale, who defaulted in the case, to pay the remaining $4,251,876.