FTC, Court Halt 'Scareware' Advertising Operations

IDG News Service —

At the request of the U.S. Federal Trade Commission, a U.S. district court has ordered two companies marketing supposed computer security products online to stop their efforts.

The U.S. District Court for the District of Maryland has ordered Innovative Marketing and ByteHosting Internet Services to stop promoting so-called "scareware" through online advertisements. The companies used online ads to scare consumers into buying products such as WinFixer, WinAntivirus, DriveCleaner, ErrorSafe and XP Antivirus, by falsely claiming that scans of consumers' computers had detected viruses, spyware and illegal pornography, the FTC said in a press release.

The court, in a temporary restraining order issued Dec. 2, also froze the assets of the people involved in the schemes in an attempt to recover money for the more than 1 million customers who purchased the scareware, the FTC said in its Wednesday announcement.

The defendants used what the FTC called "an elaborate ruse" to convince Internet advertising networks and popular Web sites to carry their advertisements. The defendants claimed they were placing online ads on behalf of legitimate companies, but then used hidden code to replace legitimate-looking ads with their own ads, the FTC said.

The defendants' ads warned Web surfers about such things as "illegal porn content" on their PCs, or that hundreds of pieces of "compromising content" had been found on their PCs. One ad warned that content found on the consumer's PC could cause the consumer to be investigated, or cause other people to find out that the consumer had an addiction to adult Web sites.

The ads urged consumers to buy the defendants' computer security products for US$39.95 or more, the FTC said.

The two companies charged in the FTC's court complaint operate using a variety of aliases and maintain offices in various countries, according to the FTC complaint. Innovative Marketing is incorporated in Belize and maintains offices in Kiev, Ukraine. ByteHosting Internet Services is based in Cincinnati, Ohio, the FTC said.

The two companies and six associated individuals have violated the FTC Act prohibiting unfair and deceptive business practices, the FTC charged.

Under the temporary restraining order, the defendants are barred from falsely representing that they have run any type of computer analysis, or that they have detected security or privacy problems on a consumer’s computer. They are also prohibited from using domain names obtained with false or incomplete information, placing advertisements purportedly on behalf of a third party without that party’s consent, or otherwise attempting to conceal their own identities.

The FTC is seeking to permanently bar the defendants from engaging in “scareware” marketing. The agency has also produced a new alert for consumers warning them about free security scans.