Sunday, September 26, 2010

Federal Judge grants FTC $37M judgment against fraudulent biller

The Federal Trade Commission, the plaintiff in this case.
Photo courtesy wikimedia. 
Northern California Federal Judge William Alsup granted summary judgment for the Federal Trade Commission in a massive enforcement action awarding over $37M to the FTC in a phone bill billing scam similar to the private action involving Verzion this blog discussed earlier.

Similar to the Verizon case, used "local exchange carrier" billing (LEC billing) where companies charged services to an individual's phone bill.  According to court documents, Inc21 was in the business of reselling long distance phone service and tacking it on to customer's local phone bill.  Eventually, it changed directions and made an online yellow pages for companies to improve their online profile.  However, they continued to bill their customers using LEC billing for a series of internet products and services.  Inc21 and similar companies employed a call center in the Philippines that called small businesses, read a message and then entered a charge for $29.95 on their phone bill for maintaining a website on the online yellow pages run by Inc21.  Surveys of customers indicated that 95% of customers had no idea what the $29.95 charge was.

The FTC sued under Section Five of the FTC Act which penalizes individuals and companies from engaging in business activities which would deceive a normal consumer.  Studies noted that over 90% of people surveyed stated that they had no idea what they were billed for and why.  They also did not feel they received any benefit from the transaction.  Judge William Alsup granted a permanent injunction preventing the defendants from engaging in telemarketing and LEC Billing and held them jointly and severally liable for $37,970,929.57.

The case is FTC v. Case No. 10-0022

FTC v. Inc21

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