Although the Federal Trade Commission is busy with twenty-first century issues such as the Internet of Things, the agency also announced an action against a more old-fashioned deceptive practice based on the Yellow Pages.
Three individuals and their 15 companies operated a Canadian-based scam targeting churches and small businesses in the United States, the agency said, raking in more than $14 million for listings in online business directories. The defendants made phone calls to potential targets to purportedly “verify” contact information or “confirm” existing directory listings; they then sent bills averaging $499.99 featuring a “walking fingers” image.
Some entities agreed to pay the bill after the defendants played a recorded phone conversation of the business verifying the contact information, the FTC said. Those that did not pay received collection calls and dunning notices (often with additional interest charges, late fees, and legal fees) from two debt collection agencies created by the defendants. The scam generated more than 13,000 complaints, the agency said.
According to the complaint, the defendants violated Section 5(a) of the Federal Trade Commission Act by making three different misrepresentations: that a preexisting business relationship existed with the entities they called, that the entities agreed to pay for the directory listings, and that the companies owed them money.
A federal court judge halted the defendants’ operations, froze their assets, and ordered a notice about the lawsuit posted on all of the defendants’ websites. The agency is seeking a permanent injunction and restitution.
To read the complaint and temporary restraining order in FTC v. Modern Technology, Inc. click here.
Why it matters: While addressing burgeoning issues such as mobile cramming and the Internet of Things, more traditional deceptive practices have not escaped the FTC’s notice and enforcement activity.