FTC v. ERG Ventures

Citation
Federal Trade Comm'n v. ERG Ventures, LLC, Civil Action No.: 3:06-CV-00578-LRH-VPC FTC File No. 062-3192 (D. Nev. Nov. 13, 2006) (http://www.ftc.gov/os/caselist/0623192/index.htm full-text]).

Factual Background
The FTC claimed ERG Ventures, LLC and one of its affiliates with tricking consumers into downloading malevolent software by hiding the Media Motor program within seemingly innocuous free software, including screensavers and video files. Once downloaded, the Media Motor program silently activates itself and downloads malware – software that is intrusive, disruptive, and makes it difficult for consumers to use their computers. Among other effects, the malware installed by the Media Motor program:


 * changes consumers’ home pages;
 * adds difficult-to-remove toolbars that display disruptive pop-up ads to consumers’ Internet browsers;
 * tracks consumers’ Internet activity;
 * generates disruptive and occasionally sexually explicit pop-up ads;
 * adds advertising icons to consumers’ Windows desktop;
 * alters browser settings;
 * degrades computer performance; and
 * attacks and disables consumers’ anti-spyware and anti-virus software.

Many of the malware programs installed by the Media Motor program are extremely difficult or impossible for consumers to remove from their computers.

Trial Court Proceedings
The FTC filed suit, charging that ERG Ventures and its affiliate Timothy P. Taylor have violated the Section 5 of the FTC Act, which bars unfair and deceptive practices. Specifically, the FTC alleged that ERG Ventures and Taylor failed to disclose to consumers that the free software they offered the public was bundled with malware. The agency also charged ERG Ventures and Taylor with using a deceptive End User License Agreement, which gave consumers the option to halt the installation of all software from ERG Ventures, but secretly installed malware whether consumers accepted or rejected the terms of the EULA. The agency also charged ERG Ventures with unfairly downloading software that causes substantial harm to consumers.

Stipulated Final Order
On October 1, 2007, the parties entered into a Stipulated Final Order that permanently barred the defendants from distributing software that interferes with consumers’ computers, including software that tracks consumers’ Internet activity or collects other personal information; generates disruptive pop-up advertising; tampers with or disables other installed programs; or installs other advertising software onto consumers’ computers. The defendants will also be required to fully disclose the name and function of all software they install on consumers’ omputers in the future, and to provide consumers with the option to cancel the installation after viewing the disclosure. The defendants will give up $330,000 in ill-gotten gains. Should the court find that the defendants misrepresented their financial status, $3,595,925 – the total revenues from their scam – will be due.