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Domain Name Registrars Settle FTC Charges

Alleged Bogus Claims Duped Consumers Into Buying Variations on Their Own Domain Names
A Canadian company and its principal have agreed to pay $375,000 in consumer redress to settle Federal Trade Commission charges that their domain name sales scheme violated federal laws. The settlement will bar the defendants from making false or misleading statements in the sale of goods or services related to domain names, e-mail or Web-hosting services; bar them from using unsolicited faxes for marketing; and bar them from violations of the Telemarketing Sales Rule (TSR).

In February 2001, the FTC alleged that the defendants duped consumers into needlessly registering variations of their existing domain names by deceptively contending that third parties were about to claim them. At the agency's request, a U.S. District Court issued a temporary restraining order, froze the defendants' assets, and shut down their Web sites, pending trial. The FTC asked the court to bar the scheme permanently and order consumer redress. The settlement announced today ends the court action.

According to the FTC, no third party had applied for the domain names, and the information in the fax solicitations was false, in violation of the FTC Act.

The settlement will bar the defendants from making false or misleading statements during the sale of goods or services related to domain names, e-mail, or Web-hosting. It will bar the defendants from using unsolicited faxes to market any goods or services and bar them from violating the TSR. It also will require the defendants to provide domain-name registrations for the full terms originally purchased by consumers. In addition, the settlement will require that the defendants tape record all outbound telemarketing sales calls made in the United States. Under the terms of the settlement, the defendants will pay $350,000 in consumer redress to U.S. and Canadian consumers and $25,000 toward costs to administer the redress fund. Finally, the settlement contains record-keeping requirements to allow the FTC to monitor the defendants' compliance with the order.

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