Sex Sites to Refund $30M to Settle FTC Charges

It wasn’t the brightest way of cheating consumers out of their money, and now the owners and operators of such adult
entertainment Web sites are paying for it — literally. The Federal Trade Commission
Monday said it is forcing the owners and operators of such sites as and to refund $30 million to customers that were allegedly bilked by visiting sites that were advertised as “free.”

The charges were brought by the FTC and New York State’s Attorney General against New York-based Crescent Publishing Group Inc., its principals, Bruce Chew and David
Bernstein and 64 affiliated corporations. The settlement bars the illegal practices in the future. It also requires that the defendants post a bond of $2 million for the corporate defendants and $500,000 each for the individual defendants before they are allowed to peddle adult entertainment on the Net.

The hefty settlement cost, which was levied on scads of other adult-oriented sites, effectively ends litigation that began in August 2000
when the FTC joined forces with Attorney General Eliot Spitzer to bring the hammer down on sites that either charged
users for services that were supposed to be free, or even more curiously, billed consumers who never visited the Web sites at all.

How is this possible? Basically, adult Web sites require valid credit card data from viewers who want to browse more than
introductory graphic or written content, often claiming that the information is used for security purposes to prove that a viewer is
at least 18 years old.

The content on the targeted sites was advertised as “Free Tour Web Sites,” but thousands of complainants alleged that they were
billed recurring monthly membership fees ranging from $20 to $90. Worse still, when consumers challenged the charges, they were met
with resistance by the defendants. According to the suit, the defendants went so far as to use billing names different than the names of the
Web sites, so consumers could not pinpoint who was billing them or why.

Following due process, the U.S. District Court in New York issued a preliminary injunction that required of charges for any “free”
tour of their sites and barred the defendants from billing consumers for any Web site services without first obtaining a $10 million
bond that could be used “to satisfy any judgment entered against the defendants,” following trial.

The settlement also requires the defendants to make it clear how, when and if consumers may be charged while navigating adult Web
sites. The FTC also reserved the right to monitor the sites for compliance with the new rules.

The FTC vote to accept the consent judgment was a unanimous 5-0.

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