FreeiPods.com Owner Sued for Privacy Breach

The New York Attorney General’s office has filed suit against Gratis Internet, the company behind sites like freeipods.com and freedvds.com, alleging Gratis sold millions of consumer email addresses, violating its promises of confidentiality.

“Unless checked now, companies that collect and sell information on consumers will continue to find ways to erode the basic standards that protect privacy in the internet age,” Eliot Spitzer, New York’s Attorney General, said in a statement, calling this the “largest deliberate breach of a privacy policy ever discovered by U.S. law enforcement.”

Washington, D.C.-based Gratis collects personal information in exchange for the chance to win iPods, DVDs, computer equipment or other prizes by signing up for free trials and other offers from advertiser partners and referring friends to do the same.

According to Spitzer’s investigation, the company assured users on several of its sites between 2000 and 2004 it would not “lend, sell or give out for any reason” users’ addresses or the information provided by users to outside companies.

Spitzer alleges Gratis owners Peter Martin and Robert Jewell repeatedly violated these promises during 2004 and 2005 by selling access to lists of millions of Gratis registrants to three independent email marketers — Datran, JDR and Jumpstart. Last week Datran Media agreed to a $1.1 million settlement in a case brought by Spitzer.

The suit claims Datran and the other marketers sent hundreds of millions of email solicitations to between one and seven million users, on behalf of their own customers. Gratis has denied sharing such data several times during the course of Spitzer’s investigation, assuring the AG’s office, “at all times during its existence . . . Gratis has never sold, rented, or lent email addresses or personal information of its users to any third-party and the company has always maintained control over and ownership of such information.”

In a statement, Martin called the allegations in the suit “completely untrue,” and maintains that the vendors were brought in to manage promotional emails to its own housefile. He said that Gratis maintained control and ownership of its user information at all times, and never profited from any sale of data.

“Gratis at no time in its history ever sold its list to anyone or allowed a company to purchase consumer data, nor has it ever considered doing so, nor will it ever in the future,” Martin said. “Establishing and maintaining a bond of trust between Gratis and consumers is a cornerstone of its business. Gratis believes that its impressive growth in recent years is a direct reflection of the fact that, in all its dealings with consumers, the company has behaved in a trustworthy and responsible manner at all times and in all ways.”

The Attorney General’s suit cites specific data-sharing contracts, as well as testimony and other evidence provided by Internet marketers that did business with Gratis. The suit, filed in New York State Supreme Court, seeks penalties and injunctive relief against Gratis and its principals under New York’s consumer fraud statutes.

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