FTC v. Verity International

Citation: Federal Trade Comm’n v. Verity Int’l Ltd., 335 F. Supp. 2d 479 (S.D.N.Y. 2004), aff’d in part, rev’d in part, 443 F.3d 48 (2d Cir. 2006), ''cert. denied,'' 127 S. Ct. 1868 (2007).

The Commission alleged that the defendants orchestrated a scheme whereby consumers seeking online entertainment were disconnected from their regular ISPs and reconnected to a Madagascar phone number. The consumers were then charged between $3.99 and $7.78 per minute for the duration of each connection. In that case, AT&T and Sprint &mdash; which were not parties to the FTC enforcement action &mdash; had carried the calls connecting the consumers’ computers to the defendants’ servers. Consumers were billed at AT&T’s and Sprint’s filed rates for calls to Madagascar.

The defendants therefore argued that the entertainment service in question was provided on a common carrier basis and thus outside the FTC’s jurisdiction. One defendant also claimed to be a common carrier itself and hence beyond FTC jurisdiction. Both the District Court and the Court of Appeals rejected those arguments.