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Hosting Service Crammed Unauthorized Charges: Court.
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NOTE: This website is where you can find advertising law information based on archived news briefs from past issues of Advertising Compliance Service. This archived news brief was published in Advertising Compliance Service in April 2001.





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A federal district court halted the operation of a Web site hosting service that advertised services for flat fees ranging from $10 to $15 dollars but then crammed unauthorized charges of up to $20,000 onto consumers' credit cards for supposed "excess bandwidth" use. At FTC's request, the court halted what the agency called "illegal billing," frozen the defendants assets and named a receiver to oversee the business, pending trial. FTC's suit names Bryan Kruchten, doing business as Page Creators and Trinity Host, L.L.C.

According to FTC, defendants used the Internet to advertise "discount" Web hosting services - such as domain name registry, Web page design and technical support - for monthly service fees of $10 to $15. Consumers provided credit card numbers so that they could be billed. Without their knowledge or approval, the defendants allegedly later charged many of their customers huge additional fees, in amounts sometimes as large as $20,000, for such things as "excess bandwidth" use, according to the agency.

FTC alleged that the additional charges were fraudulent. Computer server logs showed that the customers did not actually use anywhere near the amount of bandwidth for which they were billed, said the agency. In fact, said FTC, in some cases, the defendants billed individual customers for allegedly using more bandwidth than all their customers combined. In fact, FTC told the court, the defendants charged "excess bandwidth" fees to consumers who had not yet constructed their Web sites, to consumers who had already canceled their services and to consumers who had signed up to receive "unlimited" bandwidth.

FTC charged that Kruchten and his companies violated federal law by misrepresenting that consumers owed money for excess bandwidth and when they placed unauthorized charges on consumers' credit cards.

The Commission vote to file the complaint was 5-0.

NOTE: The Commission authorizes the filing of a complaint when it has "reason to believe" that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant actually has violated the law. The case will be decided by the court.

(Page Creators and Trinity Host, L.L.C., et al., Civil Action No. 01-523ADM/RLE, FTC File No. 012 3040, April 3, 2001.)


FTC Chairman Robert Pitofsky today announced the resignation of Debra A. Valentine. Valentine joined the Commission in May 1995 from the law firm of O'Melveny and Myers. She will leave the agency in April 2001 to return to partnership at her former firm. Pitofsky said,

"The FTC is a law enforcement agency which largely relies on its legal talent. Debra Valentine raised the level of lawyering to new heights during her tenure at the Commission, both in her service as head of our international operation and as general counsel. Our litigation record in competition and consumer protection matters over the last six-plus years has been stellar, in large part thanks to her leadership, intelligence, skills and balanced judgment. Debra ranks among the finest general counsels to serve at this agency. On behalf of the entire Commission, I thank her for her service and wish her the best."

Pitofsky also announced that he will ask John Graubert, currently the Deputy General Counsel, to assume Valentine's duties on an acting basis following her departure.

Valentine is FTC's first female general counsel, the Commission's chief legal officer and adviser. Before her current role, she was FTC's Assistant Director for International Antitrust overseeing FTC staff's dealings with competition authorities around the world and directed the staff's work with multilateral organizations such as the WTO, APEC and the OECD.

(FTC Release, April 2, 2001.)




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