A recent announcement by the Federal Trade Commission (FTC) shows how use of annoying pop-up ads can lead to e-commerce audits. The announcement describes a legal action taken by the FTC against an individual who subjected Web surfers to an unusual amount of pop-up ads. The defendant was barred from participating in certain types of Internet marketing programs, ordered to pay back his ill-gotten gains, and forced to maintain certain books and records which are subject to audits by the FTC for the next five years.
The FTC's investigation was known as the "Cupcake Party Crackdown" because the defendant had a variety of aliases that included the word "Cupcake." Using those names, he registered more than 5,500 copycat Internet domain names. Most were misspelled versions of well-known Web sites, including 41 variations on the name of teen pop star Britney Spears. When a Web user arrived at one of the copycat sites, he was pelted with a barrage of pop-up ads. Most of the ads were programmed to spawn new pop-ups, if a user began closing them – a practice known as "mouse-trapping" that makes it hard for the user to leave the site.
Altogether, the Cupcake owner amassed more than $1.8 million from the scheme. Through his participation in affiliate marketing programs, he got paid commissions from online merchants for helping to market the merchants' goods and services. Typically, payments for banners or pop-up ads are based on sales, clicks, registrations or a combination of all three.
The books and records that must be maintained and made available to the FTC include financial books and records, as well as details of e-commerce data, including registered domain names and records relating to all ventures that involve the sale of goods and services over the Internet or World Wide Web. Additional details are available in the injuction. Download the injunction.
Consumers who believe they are victims of this cyberscheme should contact the FTC at 202-326-2560 or its toll-free help line at 1-977-FTC–HELP and reference the FTC's case name, "Cupcake Party."