Spam Stings

Posted on by Chief Marketer Staff

Everyone knows spam is proliferating. After all, who doesn’t have an e-mail from those enterprising Nigerian folks in their in-box, along with hundreds of other messages they didn’t ask for? But e-mail that’s merely annoying isn’t the worst of it. Messages that are intentionally misleading and designed to defraud people of their money — or worse — is on the rise as well.

An e-mail box the Federal Trade Commission set up for consumers to forward their unsolicited commercial e-mail gets 70,000 messages a day — up from an average of 11,000 a day in 2001. Since the box (www.uce@ftc.gov) was opened in 1999, it has received 11.4 million messages — and a great deal of it is deceptive, says Brian Huseman, staff attorney at the FTC, known to colleagues as the “Spam Czar.”

E-mail makes deceiving the public easier. “A spam artist can be anonymous, can be anywhere in the world, and can perpetrate the spam for very little cost,” he adds.

One of the most egregious cases was a scheme that hooked a Web site to 900 telephone numbers and bilked consumers out of $11 million, according to the FTC.

A proposed settlement — involving three of the six defendants in the lawsuit the FTC filed last spring in Nevada federal court — was being considered at press time, but “it has not been accepted by the Commission or the court,” says Renard Francois, staff attorney in the division of marketing services at the agency in Washington, DC.

According to the FTC, a company called BTV Industries and other defendants used spam last year to lure consumers to their Web site. The subject line in most of the unsolicited messages claimed the person had won a Sony PlayStation 2 video-game console or another prize in a promotion purportedly sponsored by Yahoo Inc., the FTC alleges. Instead, the e-mail recipients were lured to an adult Internet site via a 900-number modem connection that charged them up to $3.99 a minute, according to the FTC.

When people clicked on a link in the spam message to claim their prize, they were taken to a Web page that looks like a Yahoo page, although it was not authentic, the FTC notes.

Consumers who visited that page were instructed to connect toll-free to receive their prize. And when they clicked “yes,” their computer downloaded a dialer program, which hooked up the computer to the Internet via a 900 number, the FTC complaint continues.

Just before connecting the user to the pornographic site, a disclosure box appeared, but frequently it wasn’t displayed prominently enough for the consumer to read cost information. Meanwhile, costs accrued, according to court documents. Consumers’ telephone bills later listed the charge as “Web Access 00.”

The FTC adds that “at no point does the consumer…receive any instructions on how he or she can receive the promised valuable item.”

Francois calls the alleged scheme “the most sophisticated that I have seen.”

The defendants were charged with misrepresentation, and with violating the FTC’s Pay-Per-Call rule by not revealing the cost of the connection to the Web site. A restraining order prevents the firms from conducting that particular 900-line business.

The pending settlement “contains no admission of wrongdoing,” says Lawrence I. Fox, attorney at New York law firm McDermott Will & Emery. Fox represents the defendants National Communications Team Inc., Lo/Ad Communications Corp. and Nicholas Loader, firms that operate 900 lines.

In addition, the settlement contains the types of disclosure these companies will have to insist their 900-line clients provide on their Web sites, Fox says.

Another case involves Jean Lightfoot and Charles F. Childs, who used spam to promote a get-rich-quick chain letter scheme through their Dayton, OH company Universal Direct, according to the FTC.

The pair used unsolicited e-mail and Internet advertisements to entice consumers with their “MLM Gifting Program that CAN’T FAIL,” according to an FTC complaint on file with the U.S. District Court for the Southern District of Ohio.

The FTC says that respondents could join the program by paying a $41 membership fee. Then they had two options. They could do nothing but wait for Universal to recruit 1,000 participants (each of whom would pay $41). Each initial member was promised $10,000 in “gifts” within a “Short Period.”

Or, the new members could send mailings on their own to increase the speed of their gifts, according to Tom Cohm, assistant director in the division of marketing practices at the FTC. Universal would provide them “Camera-Ready copy of the Universal Direct Club Flyer,” bulk spam software and e-mail lists, he says. The damage? About 100 people lost several thousand dollars. “We caught the scheme in its infancy before it had gotten big,” says Cohm.

The FTC won an injunction that keeps the pair from conducting business and is working on a settlement, according to Cohm.

How do spammers get e-mail lists to jump-start their schemes? Unscrupulous list brokers provide some of the files, according to Huseman.

Other addresses are harvested from public places on the Internet, such as news and message groups and chat rooms, using software designed to capture any e-mail address they find.

“If an Internet user goes on any news group, there’s a good chance your e-mail will be harvested,” Huseman says. That’s why the FTC advises consumers to use one “throwaway” e-mail address for commercial purposes and another for personal use.

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