Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: FTC action leads to ban on Internet directory scheme, (Mar 7, 2014)

By Linda O’Brien, J.D., LL.M.

In an action brought by the FTC, a federal district court has banned a Slovakia-based operation from the online directory business and entered a $9 million judgment against them, the Commission announced today.

In March 2013, the FTC filed a complaint (FTC v. Construct Data Publishers., File no. 132-3001) charging Wolfgang Valvoda, Susanne Anhorn, and Construct Data Publishers, also doing business as Fair Guide, with tricking small businesses and nonprofit organizations into paying millions of dollars to be listed in an online directory they did not want to be listed in, and for which they did not realize they would be charged.

The FTC filed its complaint in the U.S. District Court for the Northern District of Illinois, Eastern Division, charging that the defendants’ deceptive conduct violated the FTC Act. The court issued a temporary restraining order followed by a preliminary injunction prohibiting the fraud and freezing the defendants’ assets pending litigation. On February 11, 2014, the court entered a default judgment and permanent injunction against the defendants.

In addition to banning the defendants from selling online directories and directory listings, the court order announced today prohibits them from misrepresenting material facts about any products and services, selling or otherwise benefitting from customers’ personal information, failing to properly dispose of customer information, and collecting money from customers. The court also entered a $9.1 million judgment against defendants based on the consumer losses caused by the scheme.

As the FTC alleged in its complaint, the defendants sent mailings to small retailers, home-based businesses, local associations, and others who host exhibits at trade shows. The mailings were falsely linked to a trade show the recipients had attended or planned to attend, to trick them into thinking they had a preexisting business relationship with the defendants. The enclosed cover letter and form falsely suggested that the recipients needed to confirm or update their contact information for the trade show. Many did not notice a statement that by signing and returning the form they were agreeing to pay $1,717 annually to Construct Data Publishers, a company with no connection to trade shows, for a listing on its website, fairguide.com. The defendants disguised their true location in Slovakia by hiring a company in Naperville, Illinois, to print and mail the cover letters and forms.

“The last thing small business owners need is someone trying to trick them out of their hard-earned money,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “The FTC is committed to taking action against this kind of deceptive scheme.”

Companies: Construct Data Publishers

News: ConsumerProtection FederalTradeCommissionNews