“Free Software CD” Internet Operation Settles FTC Charges

Defendants who allegedly offered “free” software CDs that weren’t free, and billed unsuspecting consumers for a software continuity program they didn’t know they were enrolled in, have agreed to settle FTC charges that their practices violated federal law. The settlement bars the illegal practices in the future and requires the defendants to give up more than $2 million for consumer redress.

In January 2007, the FTC charged that the defendants’ Web site offered consumers a free CD containing computer software if they agreed to pay a shipping and handling fee of $1.99 to $2.99. Consumers provided their names and addresses to receive the CD and a credit or debit card number to cover postage and handling. Consumers who signed up for the free CD were then offered three more free software CDs with no additional shipping or handling fees. Before they completed the transaction, they checked a box saying they agreed to the “terms of use.” The “terms of use” detailed computer software licensing arrangements and usage rules, and many consumers checked the box without clicking on the hyperlink or reading the form. Buried in the seventh paragraph of the single-spaced document was language that contradicted the free software claim. It stated that consumers would be required to send back two of the four “free” CDs within 10 days or they would be charged a fee of $39 to $49. It also stated that consumers would be enrolled in a software continuity program, would receive additional CDs in the future, and would be charged $39 to $49 for those CDs unless they returned them within 10 days.

The FTC alleged in its complaint that most consumers did not know about these charges or the continuity plan until they were billed. According to the agency, because the defendants did not adequately notify consumers, they could not avoid the charges.