AOL Settles FTC Adware Complaint

The FTC charged that, now a subsidiary of America Online, had violated federal law by bundling adware with a free download of “SpyBlast” security software, but failing to disclose adequately that adware was part of the package. The FTC said the adware collected information, including URLs visited, to use for targeting pop-up ads.

“Consumers who downloaded SpyBlast also downloaded a form of software that followed their electronic comings and goings and force-fed them pop-up ads,” said Lydia Parnes, director of the FTC’s Bureau of Consumer Protection.

AOL spokesperson Andrew Weinstein said the adware delivery was a “brief experiment” conducted by in 2003 before its acquisition by AOL in June 2004 for $435 million, and before the FTC investigation began.

“Consistent with AOL’s policies, does not now and will not in future distribute any adware programs,” Weinstein said. “We support the FTC’s efforts to crack down on spyware, and we will continue to fight aggressively to protect our users from those programs.”

The settlement will require the company clearly and prominently disclose any adware bundled with its SpyBlast software, submit a report to the FTC explaining how they have complied, and keep records showing compliance with the order for the next five years, which the FTC will be allowed to inspect.

The FTC, in an analysis of the consent order, made clear it did not file its complaint because SpyBlast was security software, but because of the nature of the adware delivery.

“The proposed order is designed specifically to address the facts of the case at hand. However, the limitation in the proposed order to respondents’ software programs whose principal function is to enhance security or privacy should not be read more broadly to suggest that the requirement for clear and prominent disclosure is necessarily limited to those situations,” the analysis states. “Moreover, the problem here was not the security software that disseminated with its adware. Instead, it was the respondents’ practice of downloading software onto users’ computers, without adequate notice and consent, that generated repeated pop-up ads as the computer users surfed the Web.”

The FTC will review public comments on the agreement for 30 days before making the decision final.

Spyware and adware have blurred in the public discussion of the topic, which has become more prominent lately. The FTC began looking into the issue last year. California lawmakers considered a bill that would ban spyware last year, and have already raised the topic again this year.

New York’s attorney general settled a dispute with Intermix Media for $7.5 million in June. The suit claimed Intermix, the owner of, distributed adware, redirect and toolbar programs without adequately notifying users. Intermix admitted no wrongdoing in the settlement, and said it had voluntarily ended the practice before the complaint was filed. The company was acquired in July by News Corp.

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