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FTC Settles Domain Scam for $375,000

A Canadian company accused by the Federal Trade Commission (FTC) of a domain-name sales scam settled its case by agreeing to a $375,000 fine.

The FTC brought the case in February 2001, accusing the Toronto business, National Domain Name Registry (NDNR), of enticing domain-name holders into registering alternative domains by falsely claiming that someone else was about to claim them.

According to the FTC, NDNR would send small businesses a fax reading "URGENT NOTICE OF IDENTICAL DOMAIN NAME APPLICATION BY A THIRD PARTY," warning they could lose a similar domain name to an unidentified third party. The fax went on to offer to register the similar domain name, adding NDNR was not responsible for "interruption of business activity or business losses."

The FTC alleged NDNR fabricated the third parties, violating Section 5 of the FTC Act. Charged were Daniel Morgenstern, 1268947 Ontario Inc. and 1371772 Ontario Inc. (which did business as NDNR), Electronic Domain Name Monitoring, and Corporate Domain Name Monitoring.

As part of the settlement, the defendants agreed to pay back the $350,000 it collected in the scheme, as well as $25,000 in administrative costs. They are barred from making false statements while selling domain names, using unsolicited faxes to market their services. The defendants also agreed to tape all telemarketing calls in the U.S.

The Commission accepted the settlement 4-0, with one commissioner not voting.