Legal Issues

by Mike Masnick

Companies Pay Fines For Advertising In Adware... Still Not Clear How They Broke The Law

from the please-explain dept

Over a year and a half ago, as NY Attorney General Eliot Spitzer was investigating various spyware/adware firms, he noted that he was thinking about going after the advertisers who advertised through adware, but it wasn't entirely clear what they had done that was illegal. It may have been a bad business decision, in that adware ads tend to piss off users a lot more than it's likely to make them happy customers. However, is it really illegal to advertise that way? We had thought that it was more of an attempt to scare various advertisers away from the adware providers -- which was actually accomplished much more successfully by suing the adware firms and having advertisers realize they might not want to do business with firms under investigation for sketchy practices. The FTC took a different approach, threatening to name and shame various advertisers who used adware. Overall, though, as many of the worst adware providers have been sued out of business, we figured the issue was done with. However, Spitzer's successor, Andrew Cuomo, apparently picked up where Spitzer left off, and has convinced Priceline, Travelocity and Cingular to pay fines for advertising in adware. Now, it's hard to feel sympathy for companies that advertised that way (in fact, you might as well fine them for thinking it was a good idea in the first place), but no one has yet explained what it was that these advertisers did that was illegal. No doubt there are plenty of things that the adware firms did that broke certain laws in tricking people into installing their software -- but the advertisers had no say in that side of what was going on, so it's difficult to see what they actually did wrong here.

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  1. identicon
    _Jon, 30 Jan 2007 @ 5:41am

    Due Diligence

    I think what they did wrong is cited in the article as a new requirement. They failed to perform Due Diligence on the company they were hiring. It is a legal responsibility to ensure the company being hired to perform a task is following the law - to the best of your ability.

    Apparently, they didn't do that.

    reply to this | link to this | view in thread ]

  2. identicon
    Nasty Old Geezer, 30 Jan 2007 @ 5:43am


    This is the same basis as Sarbannes-Oxley: you should have known better. Whether you actually knew or not is irrelevant. Guily as charged (IMHO).

    reply to this | link to this | view in thread ]

  3. icon
    Steve R. (profile), 30 Jan 2007 @ 6:15am

    A case can be made

    I am not a lawyer so what I have to say comes from the lay perspective. It seems to me that many of the discussions concerning the "legality" of marketing/advertising come from the corporate perspective. Company's assert that they have a legal right to get their message out. However, what we are overlooking is the impact of that message on the consumer. The consumer, I believe, has legal right not to be injured or held as a captive audience.

    In sending advertising to the consumer the companies are obstructing the ability of the consumer to go about his/her business. I am in the middle of writing a report and an ad pops-up and I have to take time out to eliminate it.

    Many of the adware message trespass on your computer and load unauthorized programs. Essential they usurp your private property and turn it into a marketing agent. This is akin to a salesmen believing that he has a right to enter your house without your permission and make a sales pitch at your dinner table while taking the liberty to eat your dinner too.

    Three years ago my daughter accidentally hit one of the websites that downloaded a whole bunch of adware, the computer became unusable. It took a couple of days to reinstall the operating system, application programs, and other files. Now, who do I go to get reimbursed for the time and effort it took to fix the computer?????

    Finally, if companies do not have the maturity or the ethical standards to be fair to the consumer, then their actions must be constrained through the unpopular action of regulation.

    reply to this | link to this | view in thread ]

  4. identicon
    charlie potatoes, 30 Jan 2007 @ 6:24am

    what they did wrong

    i like to think of it as the equivelent of coming to my home and spray painting their name on my walls. what they did was abet the vandalizing of my property.
    they didnt spend that kind of money and not realize exactly what was going to be happening. they are as sleezy as the adware company. they deserve whatever punishment they get...
    but then, you can't actually fine a company..they simply raise prices to compensate. in essence the consumer pays the fine for them.

    reply to this | link to this | view in thread ]

  5. identicon
    haywood, 30 Jan 2007 @ 6:42am

    Re: what they did wrong

    I see it as the equivalent of driving the get-away car in a hold up, or giving a wanted felon a place to hide out. Accomplice after, during and before the fact.

    reply to this | link to this | view in thread ]

  6. identicon
    Charlie, 30 Jan 2007 @ 6:53am

    Re: what they did wrong

    If you fined every company in an industry the simply raising prices would be a valid point, but competition and the market will affect the prices far more than this fine.

    Companies usually cannot simply raise prices without seeing a drop in customers. There are a few examples (oil) where this isn't the case, but I have no reason to believe that Cingular and Priceline are in this category. People will move to Sprint, Verizon, etc, or use Hotwire if the prices are inflated.

    reply to this | link to this | view in thread ]

  7. identicon
    Tommy 2face, 30 Jan 2007 @ 6:58am

    They know what they are doing

    In a past life we worked with an affiliate who utilized adware for providing product ads to consumers and I will say you know when the company is advertising through adware. We would have 1 call for the product for every 10 calls to get the stuff removed. We dropped the advertiser but its like telemarketing, if it didn't work nobody would do it.

    reply to this | link to this | view in thread ]

  8. identicon
    David B, 30 Jan 2007 @ 8:47am

    Re: Due Diligence

    I agree 100% with your analysis. Companies are clearly responsible for what the companies they hire to advertise do. Otherwise, we would have ad agencies that would carve their clients names in the heads of homeless people for enough money.

    reply to this | link to this | view in thread ]

  9. identicon
    Anonymous Coward, 30 Jan 2007 @ 8:59am

    IANAL, nor did i read in depth of the article. from what i gether, there are some issues with companies ads being pop-ups, from which no software was directly installed?

    here goes. that's wrong. trespass or whatever. if software installs itself w/o the user being notified, nor having a clean uninstall program, that's wrong.

    what happens, methinks, is that companies hire ad agencies to do their marketing. from there, those companies outsource different parts, tv, radio, movies, billboards, internte. through this web of 'contractors" someone says, hey hire a spam agency. the orginal company has plausable deniabilty in the situation, and they get any press generated.

    now should companies be fined if their ads are adware? only if they are directly linked to the situation. our legal system has shown you aren't responsable for actions out ofyour control, this is no different.

    reply to this | link to this | view in thread ]

  10. identicon
    Phil, 30 Jan 2007 @ 9:02am

    Fines don't work...

    We are looking at this from the wrong perspective. Don't fine the companies who participate in the activities, penalize them by disallowing them to advertize - IN ANY FORM - for 90 days at a time.

    reply to this | link to this | view in thread ]

  11. identicon
    james, 30 Jan 2007 @ 9:27am

    we are alo to blame

    If you invite a thief in your home you cannot fully blame the thief. Spyware plays on passiveness. NO ONE including lawyers read the 600 page EULA and on page 450 it says "to bring you this software free we may load software that brings you special offers"
    screw reading I want my 10,000,000,000 free smileys. not one of my systems gains spyware because im mindful of the users and what gets installed

    reply to this | link to this | view in thread ]

  12. identicon
    lizard, 30 Jan 2007 @ 9:28am

    if what they (or the firms they hired to do it) caused harm (adversely affected the computers afflicted with their adware) then that is either illegal, or it should be.

    it's not legal to spray paint your ad on someone else's property, it shouldn't be legal to install your software through deceptive means on someone else's computer. i have seen what adware & spyware do to computers, and it's nothing less than vandalism.

    which is illegal, last time i checked.

    reply to this | link to this | view in thread ]

  13. identicon
    lizard, 30 Jan 2007 @ 9:34am

    Re: we are alo to blame

    they aren't targeting savvy users, they're utilizing the same sort of con-artist tactics (appealing to the greed in all of us -- wanting free stuff for seemingly nothing). the thing about using con-artist tactics against those most likely to fall victim to them, and in the process doing them harm, is it's -- yes, you guessed it, illegal.

    the little old lady who gives some stranger at a bus stop her life savings as a 'good faith' payment on some 'found lottery ticket' should know better too, as in "if it seems too good to be true it probably isn't", but it's still illegal to take her money.

    reply to this | link to this | view in thread ]

  14. identicon
    Tommy 2face, 30 Jan 2007 @ 9:35am

    Re: we are alo to blame

    I am spying on you right now.

    reply to this | link to this | view in thread ]

  15. identicon
    Celes, 30 Jan 2007 @ 10:17am

    Re: Re: what they did wrong

    I'm not sure about Cingular, but from what I know about Priceline, they earn somewhere around 8% on "name your own price" rooms and 18% on rooms where the price is disclosed and you can choose your hotel. While it's possible that they could raise that percentage, it's unlikely while they face such heavy competition in their industry. Standard commission for any travel agent is usually 10%.

    reply to this | link to this | view in thread ]

  16. identicon
    ftt, 30 Jan 2007 @ 10:41am

    i think placing a high amount of blame on the user is bad. sure, randomly DLing stuff isn't a good idea, but some sites have the active installs. (ooohhhh disable activex and whatnot... come on. i shouldn't have to disable my computer so i can use it.

    reply to this | link to this | view in thread ]

  17. identicon
    weebit, 30 Jan 2007 @ 4:45pm

    eye opener

    I have always been for going after the business that permits their hired advertisers to do as they please but advertise for us.

    In the past I have even sent emails to the company's that permitted lousy advertising practices online. This even includes scams, and places that are not even given a good report by siteadvisor, etc. I often asked them if they knew the place they were advertising was not in good standards online. Sometimes I would receive a reply, but most of the time I got no reply.

    I just think it's time we hold companies accountable for whom they do business with. After all they make it a point to check out their customers, why shouldn't they check out the company they want to do business with too?

    The fine I am sure was not high enough. I say stick it to em. After all they don't mind sticking it to the customer.

    reply to this | link to this | view in thread ]

  18. identicon
    Jimbo99, 30 Jan 2007 @ 5:16pm

    Been Advocating this for a long time

    I've written to so many trade journals suggesting this for over a year. It only seems natural that adware only exists due to advertisers using them.

    As a person who cleans systems of these malware products it is obvious that a lot of legitimate companies were using these malware producers and to claim that they were ignorant of how their ads were getting out, while hoping you'd believe them, is pure contempt for the average person.

    Your computer is an extension of your home. People need to realize this. Violating the sanctity of your home with advertising by self proclaimed ignorants is just wrong.

    What these companies have done is to enter your home without your permission and plastered the walls with advertisements because they knew your homes were not secure enough to keep them out or you were not knowledgeable enough about how to keep your home more secure.

    Even though the State of NY knew what was happening they should have made the companies funding the malware more responsible and earlier. By their not acting earlier they cost American consumers significantly.

    Even the DRM/CRM from Microsoft is a violation of your home and your privacy. No more are they entitled to enter your home to search your computers than the police would be. The police require a warrant issued by a court and signed by a Judge. What Microsoft and these other companies are doing is entering your home and spying on your use of the computer and content without your permission or knowledge by implementing DRM/CRM. The average user does not understand these concepts so it is the equivalent of doing it without permission nor knowledge.

    Reporting home to Microsoft's servers or checking your validity every 6 months is a violation of your privacy and most likely the law. Not only that their continued checking after having previously verified you were legit is akin to accusing you of being a thief. Why would you ever allow a company to continue to exist in your home if they every 6 months accused you of stealing from them and asked you every 6 months to prove you were not stealing? I doubt anyone would. So, why would you not equate Microsoft's behavior to real life situations? Not only that they are demanding that you report to them your configuration so they can use that against you if you choose fight them. They'll be using information against you that you allowed them to collect even though you didn't know they were collecting it for that purpose.

    Remember this when you hear about those business and home computers that are shut down by Vista's DRM and those cases begin to show up in court. Any company other than a monopoly would be seriously question their behavior but because Microsoft has more money in the bank they figure they can use it to fight anything.

    Now, when you consider these things remember this: Microsoft stole the intellectual property (IP) from a company that had developed and patented the concept years before. Not only that the Judge, in his ruling, cited numerous occurrences of misconduct on Microsoft's part based on the facts that stated that Microsoft felt that the owner of the IP had no ability to protect their interests and ignored that company when they were informed that they were violating their IP rights.

    The case is pretty clear. Microsoft stole the IP used to keep you from stealing their IP and when caught performed numerous acts of misconduct to cover it up. When caught they were fined additional damages of $25 million.

    Do you think they would feel any different about you the individual when it comes to them turning off your computer mistakenly? Certainly they will perceive you to be inconsequential and continue unabated. Any normal non-monopoly would certainly think hard enough about it to not implement it.

    reply to this | link to this | view in thread ]

  19. identicon
    SEOG_net, 30 Jan 2007 @ 9:54pm

    Advertising Network Chains

    One thing to consider is that not all advertisers know where there ad is showing up. Some of the investigations into the click fraud world demonstrated that ads might be passed along three generations with different people attempting to generate traffic. With affiliate offers and other programs often the source of advertising will not realize the various means by which traffic is being generated, including spyware offers.

    In addition, I have been called by this spyware companies many times and the way they sell themselves it is not always clear what they are doing -- until you really dig and investigate further (I'm a marketing manager)

    Not saying these particular companies did not realize, but for many people putting out online offers it is not always clear exactly where your offer ends up. The bigger brands have the people and resources to track down where there ads show up but many smaller advertisers could easily be duped by the slick sales people who call them and talk about their "network."

    In addition, some ad network will have legitimate traffic and then slip in spyware traffic to boost numbers, making it more difficult to determine the direct source of the visitors.

    Michael @ SEOG

    reply to this | link to this | view in thread ]

  20. identicon
    weebit, 6 Feb 2007 @ 7:36am

    no excuse

    SEOG_net this doesn't excuse them. I am sorry but it doesn't. If your paying a spammer it is up to you to see how you are being advertised. This is why I am all for click ads having a means to track the person advertising for them. We should only have to use this tracker to inform the ones they are advertising for, and the spammers tracking info. The ones they are advertising for should immediately dismiss the spammer due to the complaints. You would think a company would want honest advertisers. After all they work to show your company in a supposedly good spotlight.

    reply to this | link to this | view in thread ]

  21. identicon
    kamal, 14 Feb 2007 @ 7:51am

    please in sign up

    096 021 5527742

    reply to this | link to this | view in thread ]

  22. identicon
    kamal, 14 Feb 2007 @ 7:52am

    please in sign up

    096 021 5527742

    reply to this | link to this | view in thread ]

  23. identicon
    Ed Lowery, 10 Mar 2007 @ 10:33pm

    adware execs

    I'm sorry, but I don't see any other solution to the warewar problem except physical harm to adware/spyware execs. The government will do nothing (they could easily charge these low-lifes with planting illegal surveillance devices, but of course, they won't). But what if someone were to open a website where these vermin's pictures, addresses, daily habits etc., were exposed for all to see? And what if this site offered encouragement for the more enraged to find these scum. Since they don't fear the law, they must be made to fear vigilantes and kneecappers for any of this crap to stop.
    Or perhaps this solution: apply graphic and animation software to their images, identify them clearly, and create "real" movies of these jerks spitting on the Koran or some such - and make sure Islamic radicals know about it. That way, we'd be rid of scum, and they (the rads) would have somebody to butcher. Now that's a win-win!

    reply to this | link to this | view in thread ]

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