Posted by: Adam Solomon
January 31, 2007
Topic: Marketing and Advertising Law

On January 29, 2007 the New York Attorney General announced separate settlements with three major online advertisers for promoting products and services on the Internet through deceptively installed programs known as "adware." The agreements, with Priceline, Travelocity, and Cingular Wireless mark the first time an Attorney General has held advertisers responsible for ads displayed through adware.

The three cases grew out of the AG's investigation of DirectRevenue. In a lawsuit filed in April 2006, the AG alleged that DirectRevenue installed adware programs onto millions of computers that delivered a steady stream of advertisements, monitored web sites visited by users, and collected data typed into web forms, all without adequate notice or the consent of consumers. Furthermore the adware programs were difficult to remove and consumers who had previously downloaded the company's programs, known as "legacy users," continued to receive Priceline, Travelocity and Cingular Wireless ads through those programs. The Attorney General discovered that Priceline, Travelocity and Cingular, among others, spent hundreds of thousands of dollars delivering ads through DirectRevenue software.

The settlement agreements require that each Company deliver online ads only through companies that:
* Provide to consumers full disclosure of the name of the applicable adware program and any bundled software;
* Brand each advertisement with a prominent and easily identifiable brand name or icon;
* Fully describe the adware and obtain consumer consent to both download and run the adware;
* Make it practicable for consumers to remove the adware from their computers;
* Obtain consent to continue serving ads to legacy users;
* Require their affiliates to meet all of these same requirements.
* The agreements also require Priceline, Travelocity, and Cingular to engage in due diligence with respect to selecting and utilizing adware providers. Prior to contracting with a company to deliver their ads, and quarterly thereafter, the companies must investigate how their online ads are delivered. The companies must immediately cease using adware programs that violate the settlement agreements or their own adware policies.

Under the terms of the agreements, Priceline, Travelocity, and Cingular Wireless will pay $35,000, $30,000, and $35,000, respectively, to the State of New York as penalties and investigatory costs. This case highlights the importance that advertisers understand and take responsibility for partners they work with.

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