FTC Takes ISP to Task Over Telemarketing

At the request of the Federal Trade Commission, the District Court for the Southern District of New York has permanently banned a group of Miami-based defendants from making misrepresentations when selling Internet Service Provider (ISP) services to consumers in the future – via telemarketing or any other means.

In 2003, the FTC charged the defendants with defrauding consumers they called to sell services such as Internet access and Web site design. The court order announced today also prohibits the defendants from billing consumers without first obtaining their consent – which they must record – and provides strict rules they must follow to ensure that consumers the defendants call are protected from fraud and deception. Finally, the order establishes a program through which defrauded consumers can obtain refunds from the defendants.

The court order announced today settles the Commission charges against: Epixtar Corp.; Liberty Online Services, Inc.; National Online Services, Inc.; B2B Advantage, Inc., formerly known as SBA Online; and William Douglas Rhodes, President of Epixtar, Liberty, National, and SBA Online.

The Commission’s Complaint: In its original complaint, filed in 2003, the FTC alleged that since December 2001, the defendants telemarketed Internet services to small businesses and non-profit organizations such as churches or community service organizations nationwide. The defendants typically claimed they were calling from an actual business telephone directory and that they simply were calling to update the consumer’s business information, leading consumers to believe they had a pre-existing relationship with the defendants. In their sales pitch, the defendants claimed consumers could try SBA Online’s services free for 30 days, with no obligation to pay, and told consumers they could cancel the free services at any time. The defendants also allegedly imposed the 30-day trial on consumers without allowing them to refuse the offer.

The Commission further alleged that the defendants violated the FTC Act by failing to disclose adequately: 1) that consumers must cancel SBA Online’s Internet services before the end of the free trial period, or their business automatically would be billed $29.95 plus tax each month on their telephone bill; 2) the prescribed manner in which the consumer must cancel the trial service, and other specific steps the consumer must take to avoid the charges; 3) the inception and expiration dates of the trial service; and 4) the date the defendants would submit the charges for payment.