• by Paul Gough , November 7, 2003

A lawsuit against a San Diego firm that allegedly hijacked a Microsoft Windows feature to send pop-ups to unwitting customers who weren't even using the Web, opens a new front in the war against unwanted online advertising.

The Federal Trade Commission Thursday said it obtained a temporary restraining order against D Squared Solutions LLC, which it said created software that used the Messenger Service components of Windows to deliver pop-ups hawking a $30 product that promised to block future ads. The pop-ups would look a lot like a Messenger Service notification, which are generally sent by network administrators to tell users of system malfunctions or printing status.

Most home and non-network office users don't need the feature. But the FTC said a large, gray-colored box would appear in the middle of the screen with a text advertisement hawking the anti-pop-up program.

Or, in other words, the FTC claims D Squared Solutions created the pop-up problem and then tried to sell consumers on a program that would fix it, all without the knowledge and consent of computer users.

D Squared Solutions' pop-ups routinely interfered with other applications like word processors even when the computers weren't using a Web browser, the FTC said. The software, which it reportedly sold and licensed to other companies, could send pop-ups to up to 135,000 Internet addresses an hour with 2 million addresses in its database. It's all been done without the knowledge of Microsoft.

"It seems like the FTC feels it's a pretty offensive practice to cause a problem, and then sell someone a solution for that problem. It's like holding a gun to my head and saying I'll pay you to take the gun away," said Jeffrey A. Greenbaum, an attorney who specializes in advertising and marketing law at New York-based Frankfurt Kurnit Klein & Selz.

Experts say that it's one of the federal government's newest shots in a war against spam and other unwanted and intrusive marketing, which most recently took shape in the extended battle the FTC waged against telemarketing on the do-not-call list. Legislation is winding its way through Congress to define and prosecute spammers, and California recently passed a restrictive law that has sent warning signals throughout interactive advertising.

"The FTC has said that spam is a serious problem, and everyone in government is looking at ways to solve this problem," Greenbaum said. But solving the problem is harder than it seems, because many either operate outside the law - and in many cases, outside the country - and others are difficult to convince to follow best practices.

D Squared Solutions drew the government's ire because it's unfairly using Windows Messaging to coerce consumers into purchasing software. Greenbaum said the FTC seems to be taking a new (and more difficult) tack against spam and unwanted pop-ups. Instead of prosecuting because of deceptive acts or practices -- say, the way the agency has gone after false or dangerous diet claims -- the FTC is saying that the company is being unfair to consumers.

"It's a much more unusual way for the FTC to prosecute them," Greenbaum said. It's more difficult too, he said. ""They [the FTC] had to show that the practice is likely to cause substantial consumer injury, which is not reasonably avoidable by the consumers themselves." That's a tougher standard because the everyday user knows that they're going to come upon many different forms of advertising while on the Web; that's just the way that it is.

"I think the question of what practices are crossing the line in many instances is an open question," Greenbaum said. "Everyone knows that deceptive practices are clearly illegal but it seems the issue the FTC is reaching here is something beyond that. There may be some types of advertising that are so invasive to consumers and interfere so significantly."

Pete Blackshaw, chief marketing officer at Cincinnati-based Intelliseek Inc., said he's not surprised by the FTC's action and predicts that it won't be the last action by the feds and the states if the industry doesn't step up and do something about pop-ups. The endless stream of pop-ups and spam e-mails have struck a nerve with consumers; three separate Intelliseek surveys found consumers say pop-ups are more annoying than even spam and telemarketing.

"We may see more of this [government action] without any self-regulation by the industry," said Blackshaw, who moderated a panel on pop-ups at Ad:Tech earlier this week. "I think the advertising groups should be really sensitized to these practices, because they inherit a lot of the ill well from consumers."

Several firms that specialize in above-the-board pop-up advertising declined comment for this story about what the FTC's action could do to the industry, saying they didn't want to be associated with the kind of "bad actor" practices the FTC is alleging. But Blackshaw and others say that the FTC's enforcement action could start with the seamier marketers and then branch out to affect everyone using pop-ups.

Blackshaw said that some online marketers are faced with a dilemma, challenged to look at the big picture -- the 95 percent of Internet users who find pop-ups annoying, not the 5 percent or so who play with the ads. He said that marketers use pop-ups because there's a short-term return on investment but, collectively, the pop-ups collect exhaust that sucks the life (and the interest) out of consumers for what he said had potential for permission-based marketing.

He urged the industry to take up the challenge of self-regulation now, before the federal government and the states do it for them in a way that marketers will find restrictive. He pointed to California's anti-spam law as an example.

"Absent any form of industry self-regulation, it can take you on a dangerous path," Blackwell warned.

A telephone number for D Squared in San Diego couldn't be located Thursday. A lawyer who represented D Squared as recently as the summer didn't return phone calls Thursday.

In court documents, the FTC listed 30 Web sites that it said were operated by D Squared and its licensee. They included blockmessenger.com, broadcastblocker.com, broadcastbuster.com, roadcastermarketer.com, bustpopups,com, fightpopups.com, messengerbegone.com, killmessenger.com and saveourprivacy.com.

"This is only the beginning," Greenbaum predicted. "The FTC is making some very, very strong arguments here and it's going to be a fascinating case to watch."