NY Sues Direct Revenue for Alleged Spyware Practices

  |  April 4, 2006   |  Comments

The firm calls the suit a "baseless attempt...to rewrite the rules of the adware business."

New York Attorney General Eliot Spitzer is making interactive marketing news again. This time he's sued Direct Revenue, accusing the company of secretly installing millions of pop-up ad programs on consumers' computers.

"Surreptitiously installed spyware and adware harm consumers and businesses, and my office will continue to prosecute these practices aggressively," said Spitzer in a statement.

Direct Revenue's legal counsel, Andrew Celli with Emery, Celli, Brinckerhoff & Abady, told ClickZ News the company is "mystified" by the lawsuit but intends to vigorously defend itself in court. "This is a case about past practices, practices that we believed at the time and believe today were appropriate and legal," he said. The firm had been trying to resolve the matter with the AGs office but was rebuffed.

Despite Celli's statements about the legality and appropriateness of past distribution practices, Direct Revenue has made changes recently. The company last year hired a new CEO and halted third-party distribution. In another tacit admission that its distribution methods have been flawed in the past, the company is starting from scratch in building a new behavioral network.

"Direct Revenue is a member of the Network Advertising Initiative (NAI), has pledged to adhere to TRUSTe's proposed adware guidelines, and already adheres to HR 2929 [pending spyware legislation], even though it has not been enacted," the company said in a statement.

It's not clear exactly what time period the New York State lawsuit covers. Spitzer's office says it filed suit after an "extensive investigation" into Direct Revenue's distribution practices. Most damning, perhaps, are comments allegedly made by company executives in emails the AG's office says it obtained. In one, Direct Revenue's then-CEO Josh Abram is said to have boasted, "We have a very stealthy version of our adware product which we're happy to give u… Don't worry. If we do a deal -- a build together -- these will not be caught."

The AG's office says Direct Revenue's adware was bundled with free software, but consumers weren't given ample notice of the download. In other cases, the company allegedly used "drive-by downloads." Once the software was installed, according to the suit, Direct Revenue deliberately made it difficult for people to uninstall it.

The suit seeks to halt the firm from surreptitiously installing spyware or sending ads through applications already installed. It also asks that a court impose an appropriate fine.

Spitzer has been on a roll in addressing issues of interest to the digital marketing community. Last year, the New York AG's office sued Intermix, the parent company of MySpace.com, in a suit similar to the one against Direct Revenue. That case was later settled. More recently, he settled a dispute with email marketer Datran Media. Additionally, the owner of FreeiPods.com faces a suit filed by Spitzer's office accusing it of privacy violations.

Spitzer is engaged in a campaign to become governor of New York, hoping to unseat current Governor George Pataki.

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ABOUT THE AUTHOR

Pamela Parker

Pamela Parker is a former managing editor of ClickZ News, Features, and Experts. She's been covering interactive advertising and marketing since the boom days of 1999, chronicling the dot-com crash and the subsequent rise of the medium. Before working at ClickZ, Parker was associate editor at @NY, a pioneering Web site and e-mail newsletter covering New York new media start-ups. Parker received a master's degree in journalism, with a concentration in new media, from Columbia University's Graduate School of Journalism.

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