Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: FTC applauds appeals court ruling affirming $163 million judgment against computer “scareware” marketer, (Mar 3, 2014)

By Linda O’Brien, J.D., LL.M.

In a “victory” for the FTC in its efforts to protect consumers from spyware and malware, a federal appeals court has upheld a district court ruling that imposed a judgment of more than $163 on corporate officer Kristy Ross for her role in an operation that used computer “scareware” to mislead consumers into thinking their computers were infected with malicious software, and then sold them software to remedy the non-existent problem.

“This is a huge victory for consumers,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “As this case shows, scareware causes enormous economic injury. We remain committed to protecting consumers against this kind of scam.”

In December 2008, the FTC filed a complaint (FTC v. Innovative Marketing, Inc., File no. 072-3137), charging Innovative Marketing, Inc., Ross, and several of its officers with deceptive and unfair practices by using misleading Internet advertising to issue false security and privacy warnings. The other defendants either settled the charges or had default judgments entered against them.

In October 2012, in addition to the imposing the monetary judgment, the U.S. District Court of the District of Maryland permanently prohibited Ross from selling computer security software and any other software that interferes with consumers’ computer use, and from any form of deceptive marketing. Ross appealed the district court ruling, including its finding in favor of the FTC on the issue of whether Ross was a “control person” who could be held liable for the deceptive practices.

In affirming the district court’s findings, the appellate court stated that to rule in Ross’ favor “would effectively leave the Commission with the ‘futile gesture’ of obtaining ‘an order directed to the lifeless entity of a corporation while exempting from its operation the living individuals who were responsible for the illegal practices’ in the first place.” The decision was issued by the U.S. Court of Appeals for the Fourth Circuit, on February 25, 2014.

Companies: Innovative Marketing, Inc.

News: ConsumerProtection FederalTradeCommissionNews