• by Wendy Davis  @wendyndavis, March 24, 2006

New York State Attorney General Eliot Spitzer has hauled online marketing company Gratis Internet into court for allegedly selling e-mail lists and other consumer data after promising to keep such information private.

In a lawsuit filed Wednesday, Spitzer's office alleged that Gratis--the company behind a series of Web sites offering "free" iPods, DVDs, and other merchandise to consumers who agree to receive free trial offers--sold names, e-mail addresses, postal addresses, phone numbers, and IP addresses of more than 7 million consumers to e-mail marketing companies Datran Media, Jumpstart Technologies, and JDR Media. Gratis, based in Washington, D.C., had promised consumers on its Web site that it would not share their personal information with third parties.

Gratis denied the charges. "Allegations made by the New York State Office of the Attorney General that Gratis Internet 'sold' email addresses to Datran Media or other companies, and/or that these companies "purchased" personal user information from Gratis Internet are completely untrue," said the company in a statement. "Gratis at no time in its history ever sold its list to anyone or allowed a company to purchase consumer data, nor has it ever considered doing so, nor will it ever in the future," said the company.

Gratis also stated it had hired Datran Media "to manage the logistics of marketing products and services via email to Gratis' own user base" from June 2004 until the end of the year. After that period, Gratis hired JDR and Jumpstart to oversee creative design and provide back-office support, according to Gratis.

But, according to the complaint, in June 2004, Gratis sold data about 7.2 million consumers to e-mail marketing company Datran Media, which agreed to share one-half of the revenue it received from its own advertising clients for sending e-mails to those consumers. Spitzer's office also investigated Datran, which earlier this month agreed to pay $1.1 million to close the investigation.

The suit alleges that Gratis told Datran, Jumpstart, and JDR that users had consented to disclosure of their information. But a written assurance of discontinuance agreement signed by Datran representatives and Spitzer's office several weeks ago stated that the Attorney General's investigation revealed that Datran knew in "a number of cases" that Gratis had promised to refrain from disclosing consumer information.

According to the complaint, Datran sent between 85 million and 100 million e-mails to the addresses Gratis provided, and paid Gratis about $367,000--although the court papers state that it's not clear how much of that stemmed from e-mail addresses that weren't supposed to be shared. JDR allegedly sent approximately 200 million e-mails to addresses obtained from Gratis, while Jumpstart allegedly sent about 41 million.

Datran spokesman Mark Naples said in a statement last week that Datran "discontinued the practice" in the first half of 2005, before the Attorney General began making inquiries. (Naples is a columnist for MediaPost's Online Spin.) Datran also named a chief privacy officer last month.