August 23, 2000 05:29pm
FTC, New York sue X-rated sites for improper billing
Source: Reuters
by: Jeremy Pelofsky
(WASHINGTON) -- Law enforcement officials filed suit Wednesday against the operators of at least 36 adult entertainment Web sites, including (www.playgirl.com), for illegally billing customers for services that were advertised as free and charging others who never visited the sites.
The defendants allegedly promoted the Internet sites as free but demanded visitors turn over credit card numbers as proof they were the legal age to view sexually explicit material, according to the Federal Trade Commission and New York Attorney General's office which filed the suit.
However, the consumers were charged monthly membership fees of between $20 and $90 and were hampered in their attempts to dispute the charges by the defendants, according to the complaint filed in the U.S. District Court for the Southern District of New York.
``Consumers may well be losing $10 million per month to this scam. Hundreds of thousands of consumers have disputed millions of dollars billed by defendants,'' the complaint said.
The so-called ``Free Tour Web Sites'' took in $188 million in revenue between 1997 and October 1999, $141 million during the first 10 months of 1999, the complaint said.
Crescent Publishing Group, its owner Bruce Chew and principal David Bernstein along with 64 affiliated corporations that run adult Web sites were named as the defendants in the suit.
``This is one of the biggest Internet cases we've brought,'' said Steven Baker, an FTC lawyer. Attempts to locate the defendants and their lawyers for comment were not successful.
To avoid getting caught, the defendants allegedly used billing names that were different from the Web site names making it difficult for consumers to determine who actually was billing them and why, according to the complaint.
Additionally, the consumers had trouble contacting the defendants to obtain refunds, the FTC and New York Attorney General's office said.
The defendants also constantly changed their corporate billing names to avoid being caught by credit card companies, the complaint said.
Yet, one credit card company, Visa USA, cut the defendants off when it realized what was occurring but that only led the Web site operators to move their merchant banking relationship to Guatemala.
The FTC and New York prosecutors asked the federal court to to issue a preliminary injunction to halt the practices, appoint a receiver to oversee the businesses and freeze the defendants' assets pending a trial so they could be preserved for consumer redress. REUTERS
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