FTC Announces "Largest Civil Penalty Yet" for Illegal Spam Under CAN-SPAM Act

Posted by Ronald London

The Federal Trade Commission announced that it has entered a consent decree with Jumpstart Technologies requiring it to pay a $900,000 civil penalty for violating the CAN-SPAM Act by sending "disguised" and misleading commercial emails, or "spam." The payment is the largest penalty ever for illegal spam, according the FTC. The consent decree also permanently prohibits Jumpstart from engaging in future practices prohibited by the CAN-SPAM and FTC Acts.

In a complaint filed virtually concurrently with the settlement accord, the FTC alleged that, as an Internet marketer that provides direct marketing opportunities for its advertising partners and collects marketing information to sell to third parties, Jumpstart operated a "FreeFlixTix" promotion that violated the CAN-SPAM Act by disguising commercial emails as personal messages, and by misleading consumers as to the terms and conditions of the promotion.

Specifically, the FTC alleged Jumpstart offered free movie tickets to consumers in exchange for names and email addresses of five or more of friends, to whom in turn Jumpstart sent commercial emails with the original consumer's email address in the "from" line and a seemingly personal "subject line" such as, "Hey," "Movie time. Let's go." or simply "Invite."

According to the FTC, Jumpstart also wrote the emails to the friends so that they appeared as if the consumer who provided their email addresses authored the message text. These practices, the FTC alleged, allowed Jumpstart to circumvent some spam filters. As a result, friends referred by consumers sometimes received multiple emails urging them to join FreeFlixTix, according the FTC, and some of the emails contained ads for products or services offered by Jumpstart partners. In addition, the FTC claimed that in many instances, the subject lines falsely indicated a friend was sending free movie tickets, and many people who tried to opt out of the promotion continued getting unwanted emails for weeks afterward in violation of the CAN-SPAM Act's 10-day opt-out standard.

The FTC's complaint also alleged that Jumpstart engaged in deceptive advertising by misleading consumers about the terms and conditions of the FreeFlixTix promotion. To qualify, some consumers had to submit credit card information to one of Jumpstart's advertising partners and sign up for one of their promotions. Certain of the partners required consumers to pay for the promotion, while others made "free" offers that had to be cancelled at a later date to avoid charges. The FTC alleged that these practices violated the prohibitions on unfair trade practices.

The settlement with Jumpstart is another indicator that the FTC intends to remain active in enforcing consumer protections under the CAN-SPAM Act and other rules and laws, such as its Telemarketing Sales Rule.

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