Court Upholds Injunction on Online Adult Billing System

NEW YORK — A federal appeals court has affirmed a lower court decision that online adult company Verity International Ltd. engaged in unfair trade practices by charging modem users through their phone bills as if they had made international calls to Madagascar, an island nation off the east coast of Africa.

On Monday, the 2nd U.S. Circuit Court of Appeals upheld the Federal Trade Commission’s injunction preventing the defendants from using the improper billing system.

In the alleged dialer scheme, the FTC sued Verity and Automatic Communications, along with owners Marilyn Shein and Robert Green, claiming their disguised billing method created a loophole for people to access online adult content over phone lines without the subscriber’s permission.

The 2nd Circuit rejected the companies’ claim that it was exempted from FTC enforcement because they were “common carriers.” Verity and Automatic, in its argument, said that it was immune from federal regulation because it simply used the billing services of existing phone companies — AT&T, Sprint and AT&T U.K. — to charge its customers anonymously.

In the decision, the appeals court affirmed the FTC’s injunction preventing Verity and Automatic from using the improper billing system and remanded the case back to U.S. District Court in New York to work out restitution matters. The lower court originally imposed a $17.9 million fine against the companies and its owners, but the court requested that it be recalculated.

The FTC claimed that thousands of consumers were defrauded of nearly $250 a piece for services that they did not know had been accessed through their phone lines. Those charges were represented as international telephone calls to Madagascar.

The FTC’s suit stems from a dramatic influx of complaints against Verity that were received since September 2000 through the FTC’s call center and logged in Consumer Sentinel, a database used by law enforcers around the world. A probe revealed that charges on consumers’ phone lines were being initiated by dialer software downloaded from teaser adult sites.

In its complaint, the FTC charged that the calls were reconnected not to Madagascar, but “short-stopped” in London or some other location. Line subscribers were charged the rates to Madagascar at $3.99 per minute, compared to about 8 cents per minute to London.

Two additional companies allegedly conspired with Verity and Automatic, according to the suit. Those companies are Integretel Inc. of San Jose, Calif., and eBillit, a subsidiary of Integretel.

The case is FTC vs. Verity International Ltd., et al, No. 04-5487.

Copyright © 2024 Adnet Media. All Rights Reserved. XBIZ is a trademark of Adnet Media.
Reproduction in whole or in part in any form or medium without express written permission is prohibited.

More News

Seoul Authorities Force Cancellation of Adult Expo for 'Distorting Perceptions of Sex'

Seoul authorities repeatedly prevented 2024 KXF The Fashion — a popular Korean adult industry expo featuring Japanese AV performers — scheduled for this week from finding a suitable venue, leading organizers to cancel the event.

FSC to Hold Discussion on Adult Industry Rights With Congressional Candidate Joe Cohn

Free Speech Coalition will hold a virtual discussion with Joe Cohn, a strong advocate for the adult industry’s rights who is running for Congress in November.

Sophie Dee, Ricky Johnson to Deliver 'XBIZ Talks' at Miami Conference

XBIZ is pleased to announce that Sophie Dee and Ricky Johnson will each deliver an “XBIZ Talk” at next month’s XBIZ Miami conference

FSC to Host Webinar on Derisking and the Adult Industry

The Free Speech Coalition (FSC) is hosting a webinar on derisking, titled "Derisking: Examining Its Impact on the Adult Industry's Access to Banking," on April 24 at 11 a.m. (PDT).

Democratic Governor Fails to Veto Kansas Age Verification Bill

Kansas’ Democratic governor, Laura Kelly, expressed strong reservations about the state’s version of the age verification bills being sponsored around the country by anti-porn religious conservative activists, but ultimately decided not to veto it, allowing the legislation to become law by default without her signature.

FSC's Alison Boden Testifies Against California Age Verification Bill, Urges Action to Defeat It

Free Speech Coalition Executive Director Alison Boden testified Tuesday against AB 3080, California’s version of the age verification bills being sponsored around the country by anti-porn religious conservative activists.

Phoenix Marie Sues Aylo, Danny D Over Incident on Digital Playground Set

Phoenix Marie has filed a lawsuit against Aylo, performer/producer Danny D and other defendants, alleging she has suffered defamation and damage to her career over a 2023 incident on a Digital Playground set in Spain.

New Premium Creator Platform 'Lemon Social' Launches

Premium creator platform Lemon Social has debuted.

Atlanta Authorities Renew Attack on Adult Boutique Tokyo Valentino

The saga of beleaguered Georgia adult boutique Tokyo Valentino continues with a renewed attempt by authorities to shut down another of its locations.

MomPOV Producer Pleads Guilty in GirlsDoPorn Case

MomPOV producer Doug Wiederhold, who was formerly the partner of GirlsDoPorn owner Michael Pratt as well as the first male talent for GDP, pleaded guilty Thursday to a federal conspiracy charge.

Show More