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ValueClick to Pay $2.9 Million to Settle FTC Charges

'Free' products weren't free, consumers' data wasn't secure

March 18, 2008

ValueClick and its subsidiaries, Hi-Speed Media and E-Babylon also were charged with failing to secure consumers’ sensitive financial information, despite their claims to do so.

The settlement, filed by the Department of Justice on behalf of the FTC, requires ValueClick to disclose clearly and conspicuously the costs and obligations consumers must incur to receive the products it touts as “free” and bars future violations of the CAN-SPAM Act. It also prohibits deceptive claims about the security of the consumer information collected at its e-commerce Web sites.

According to the FTC, ValueClick subsidiary Hi-Speed Media used deceptive e-mails, banner ads, and pop-ups to drive consumers to its Web sites. The e-mails and online ads claimed that consumers were eligible for “free” gifts, including laptops, iPods, and high-value gift cards, and included come-ons such as “Free PS3 for survey,” and “CONGRATULATIONS! Select your FREE Plasma TV.”

The FTC also contended that consumers lured to ValueClick’s Web sites by these promises were led through a maze of expensive and burdensome third-party offers -- including car loans and satellite television subscriptions -- which they were required to “participate in” at their own expense, in order to receive the promised “free” merchandise.

In addition, ValueClick’s use of deceptively labeled e-mail offering “free” gifts and its failure to disclose that consumers must expend substantial sums of money to obtain the promised “free” merchandise was found to be in violation of the CAN-SPAM Act and the FTC Act.

The settlement prohibits future violations of the CAN-SPAM Ac and requires ValueClick and Hi-Speed Media to provide a list of the obligations -- such as applying for credit cards, purchasing products, or obtaining a car loan -- that consumers must incur to qualify for a free product.

In addition, ValueClick and Hi-Speed Media must pay a $2.9 million civil penalty to resolve the Commission’s CAN-SPAM allegations -- the largest settlement in a case based on the 2003 CAN-SPAM Act.

The settlement also bars ValueClick, Hi-Speed Media, and E-Babylon from making misrepresentations about the use of encryption or other electronic measures to protect consumers’ information, and about the extent to which they protect personal information. And it requires the companies to establish and maintain a comprehensive security program, and obtain independent third-party assessments of their programs, for 20 years.

This is the FTC’s third case targeting the use of deceptive promises of free merchandise by Internet-based “lead generation” operations, and the Commission’s 18th case challenging data security practices by a company handling sensitive consumer information.

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