FTC Honcho Praises Spitzer's Suit Against Adware Purveyor

Ad-serving software that sends consumers pop-up ads isn't in itself unlawful, but companies that distribute such software without first giving consumers adequate notice might be engaging in deceptive advertising, Lydia Parnes, director of the Federal Trade Commission's Bureau of Consumer Protection, said Thursday at a spyware conference in New York.

Parnes said that burying the details of ad-serving programs in an end-user license agreement--as many adware companies are believed to do--did not constitute clear and conspicuous notice, which is a bedrock requirement of advertising.

"When it comes to spyware, consumers really need to understand what they're getting," Parnes said to the more than 100 people--including adware company executives, anti-spyware software vendors, and government representatives--who attended the conference, "eCommerce in the Age of Spyware," presented by the Network Advertising Initiative. Parnes also said the FTC defines spyware as software installed without notice, or without adequate notice, that causes substantial harm to users. This definition potentially encompasses adware, as well as programs that compromise security monitoring keystrokes or frustrate users by hijacking browsers.

She characterized the alleged behavior of Intermix Media--a Los Angeles-based adware purveyor recently sued by New York Attorney General Eliot Spitzer--as a "textbook case" of deceptive advertising. "The New York Attorney General's office is to be congratulated," she told the audience.

In the Intermix case, one of the charges is that the company disclosed information about its adware programs in the fine print of its end-user license agreement--as opposed to giving notice more prominently. When Spitzer brought the suit last month, the allegations startled many in the online ad industry, because many adware companies are believed to likewise include the most important notices about their product in lengthy end-user license agreements.

Parnes said her agency has heard that Spitzer is considering actions against a number of other adware companies. Spitzer's spokesman declined to comment on other investigations, other than to say that the Attorney General is "continuing to review practices throughout the industry."

The conference was held the day after federal legislators in the Senate considered new regulations for ad-serving software. The U.S. House of Representatives also is mulling a bill that would regulate such software. Several states also have passed laws regarding adware--but these laws could be preempted by new federal legislation.

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