August 25, 2000 07:55am
Web Porn Takes Hit From FTC
Source: Forbes.com
by: Betsy Schiffman
Visa is everywhere most people want to be, but there are some places even Visa won't go--namely, porn sites.
On Aug. 23, the Federal Trade Commission filed a complaint in the U.S. District Court for the Southern District of New York against more than 30 Web sites including Playgirl.com and Crescent Publishing, owner of a variety of porn sites including HighSociety.com, for illegal billing practices.
According to Doug Wolfe, attorney at the Federal Trade Commission Bureau of Consumer Protection, the corporations named are charging consumers for content labeled as free and, in some cases, billing consumers who didn't even visit the specific site. The complaint alleges that ``free'' content on the named adult sites generated about $188 million between 1997 and October 1999.
``We received a tremendous number of complaints,'' Wolfe says. ``Usually the adult sites will say people are trying to scam them, but in this case it's clear that consumers were getting scammed.''
HighSociety.com requires visitors to enter credit-card information for what is supposedly a free sample. ``Just enter a valid credit card to get your free look....While you enjoy your free look, your card will not be billed,'' it says on the Web site. However, the Federal Trade Commission charges that consumers were billed between $20 and $90 in recurring membership fees.
It's a rocky time for online adult entertainment, one of the most profitable industries on the Internet. American Express (NYSE: AXP - news) recently stopped accepting online porn merchants because of the high volume of customer disputes. The company notified its adult site merchants of the policy change in May and expects to be entirely rid of adult site merchants soon, a spokeswoman for American Express says.
It's a hefty chunk of change American Express could be leaving on the table. Online porn is estimated to have generated between $1.5 billion and $1.8 billion in 1999, and that figure is growing, says Stacy Boyd, executive editor of the industry trade magazine AVN Online. Seattle-based Internet traffic monitor SexTracker.com estimates that there are more than 100 new adult sites coming to the Internet every week and that worldwide there are about 500,000 adult sites up and running.
Visa and MasterCard spokesmen were not available to comment on company policies going forward, but according to the Federal Trade Commission statement, Visa U.S.A. disqualified Crescent Publishing from using its system when it discovered its billing practices.
Boyd says that while fraud is indeed a problem, it is not pervasive in the industry as a whole.
``There's a major movement among the most respected Webmasters to get everyone in the industry on the same page. Some adult sites are run by nonlegit individuals,'' Boyd says. ``The sense in the industry right now is that if they're getting caught for fraudulent activity, that's great because it reflects badly on the rest of the businesses.''
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