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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, consumer - many of them operating small businesses on the Internet - received unsolicited fax solicitations stating, "URGENT NOTICE OF IDENTICAL DOMAIN NAME APPLICATION BY A THIRD PARTY." The solicitation warned that an application for a domain name almost identical to the recipient's has been "submitted to the National Domain Name Registry (NDNR) for registration" by an unidentified third party. For example, the FTC alleged the defendants told the owner of a site "" that an application had been submitted to obtain the domain name "" The solicitation continued, "Consequently, it is our opinion that this application may have been submitted in bad faith ..." The solicitation listed four reasons someone might want a copy-cat domain name, including "disrupting the business of a competitor," or intentionally attempting to lure the customers of another business by creating a confusingly similar Web address. The fax solicitation offered to block the application by obtaining the copy-cat domain name for the fax recipient for a fee of $70. It warned that, if the consumer fails to act, "NDNR WILL NOT BE LIABLE FOR THE LOSS OF DOMAIN NAME LICENSE, IDENTICAL OR CONFUSINGLY SIMILAR USE OF YOUR COMPANY'S NAME; OR INTERRUPTION OF BUSINESS ACTIVITY OR BUSINESS LOSSES."

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