Priceline, Travelocity and Cingular have settled a lawsuit over their secret use of adware Internet software programs as marketing tools filed by New York State Attorney General Andrew Cuomo.
As part of the settlement, Priceline, Travelocity and Cingular agreed to pay US$35,000, $30,000 and $35,000, respectively, to New York to cover penalties and investigatory costs. While this case won’t stop the popular practice, it should have a chilling effect on the industry.
Cuomo’s office, calling the settlement “groundbreaking,” said it ended a lawsuit filed against the three companies. The agreements “mark the first time law enforcement has held advertisers responsible for ads displayed through adware,” said the attorney general’s office.
“Advertisers will now be held responsible when their ads end up on consumers’ computers without full notice and consent,” Cuomo said in the statement. “Advertisers can no longer insulate themselves from liability by turning a blind eye to how their advertisements are delivered, or by placing ads through intermediaries, such as media buyers.”
It called adware an “odious practice.” The lawsuit was initially filed in April 2006.
The attorney general’s office launched a probe into adware provider Direct Revenue several years ago. It discovered that Priceline, Travelocity and Cingular, among others, “spent hundreds of thousands of dollars delivering ads through Direct Revenue software.”
New York claimed Direct Revenue systems “installed adware programs onto millions of computers worldwide that delivered a steady stream of advertisements, monitored Web sites visited by users, and collected data typed into Web forms — without adequate notice or the consent of consumers.”
Leaving a Legacy
The state said the adware programs “were difficult to remove, and consumers who had previously downloaded the company’s programs without full notice and consent, known as ‘legacy users,’ continued to receive Priceline, Travelocity and Cingular ads through those programs.”
Under the terms of the settlements, Priceline, Travelocity and Cingular agreed to be more careful about their online advertising practices. In part, they will provide customers with the names of any adware programs being used, they will label all advertisements with “prominent and easily identifiable” brand names or icons, they’ll thoroughly describe the adware and ask permission to download and run any programs.
Also, any adware installed on a consumer’s computer must be easy to remove.
Not What They Intended
“We stopped using Direct Revenue about a year and a half ago, before October of 2005,” Cingular spokesperson Mark Siegel told the E-Commerce Times. “When we used them, they assured us that customers would either be able to opt out or, if they did use it, they could opt out with ease. We couldn’t agree with that whole premise more. Consumers should be in complete control.”
Cingular currently uses no adware, according to Siegel.
Travelocity issued a statement saying it terminated its relationship with Direct Revenue early last year, has “fully cooperated with the New York Attorney General’s office” and complies “with our industry’s strict adware guidelines, as found at www.interactivetravel.org.”
New York could be perceived as mixing apples and oranges, since the programs it described — those that are surreptitiously installed on PCs to gather personal information, track browsing and do other dirty deeds — are more commonly called spyware. A statement on the Priceline Web site explains the differences and says the company does not use spyware and has strict restrictions on adware.
“Adware can be useful to many consumers because it provides timely, relevant and money-saving information, or it helps defray the cost of free linked software programs,” said the Priceline statement.
Whether it’s targeting spyware or adware, the settlement “wakes people up” and “is a response to an outcry” from angry computer users, Gartner analyst Adam Sarner told the E-Commerce Times. While the fines don’t amount to much money, the case should scare some companies from relying on bothersome or sneaky Internet advertising methods, he suggested.
“This has some sort of chilling effect because it’s the first time that there’s a settlement,” Sarner added. “It raises the visibility and people don’t want to have relationships with companies that do this.”
While the New York case is the first involving companies using adware, David Fish, a lawyer in Illinois, said his firm — The Collins Law Firm — successfully sued Direct Revenue about two years ago.
“At that point, they were a very little company,” he said. “We had countless numbers of people calling us saying, ‘I have this crap on my computer and I can’t get it off.'”
The lawsuit ended with a federal court injunction against Direct Revenue and a settlement prohibiting the company from installing software on computers without consent.
Requests for comment from Direct Revenue were not answered.