• by Wendy Davis  @wendyndavis, March 16, 2006

Adware company Direct Revenue has agreed to settle a class-action lawsuit stemming from allegations that it installed ad-serving software on consumers' computers without their consent.

The proposed settlement calls for Direct Revenue to refrain from distributing adware on sites targeting children under 18, and from using the word "free" in banner ads--such as for "free screensavers"--unless those ads also state that the product is supported by adware.

Direct Revenue also agreed that it will ensure that consumers agree to receive adware before any pop-up serving software is installed. Further, the company promised that it won't collect any personally identifiable information--such as name, address, and social security numbers--and will destroy whatever such information it might have in its possession. In a statement on its Web site, Direct Revenue said it has a long-standing policy of not collecting personally identifiable information, and that it doesn't currently distribute its software on sites targeted to children.

The company also promised to begin offering an 800 telephone number that has pre-recorded instructions for removing the adware, and live telephone help for visually impaired consumers. Direct Revenue also will now use the word "advertisement" instead of "offers" to describe promotions.

The case, Sotelo v. Direct Revenue, was brought last March by The Collins Law Firm, P.C., of Naperville, Ill. The same law firm also brought a similar lawsuit against Direct Revenue rival 180solutions last September; that case is still pending.

David Fish, a lawyer with The Collins Law Firm, said that he anticipates that any settlement with 180solutions would include terms similar to those of the Direct Revenue settlement.

A 180solutions spokesman said the company currently doesn't allow its adware to be distributed on sites targeted to children, but does sometimes use the word "free" in its banner ads. "In these instances, the value proposition is clearly explained in the notice and consent process," said the spokesman.

Direct Revenue will not have to pay monetary damages to individual consumers as part of this settlement, but Fish said that consumers will retain the right to sue on their own. "One thing that we haven't done," he said, "is waived the rights of class members to seek monetary damages of intermediaries and other people who profited off of these practices."

Another provision of the agreement calls for Direct Revenue to closely police its distributors.

Spyware expert Eric Howes, Sunbelt's software director of malware research, expressed mixed feelings about the agreement. "The settlement certainly isn't as strong as I would have hoped--substantial monetary damages for consumers would have been ideal," he said, adding that he also would have liked to see Direct Revenue prohibited from using affiliates to distribute adware.

But, he added, Direct Revenue had made strides in the last year to cut down on improper installations.

The settlement still must be approved by the judge handling the case, Virginia Kendall of the Northern District of Illinois in Chicago. She will hold a hearing on the proposed agreement on April 24.