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Zango Settles With FTC for $3M

Zango Settles With FTC for $3M
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Nov 3, 2006 11:23 AM PST    Text size: 
BELLEVUE, Wash. — The scourge of many adult webmasters got hit where it hurts: in the wallet.

Zango, the adware manufacturer, reached a settlement with the Federal Trade Commission to pay $3 million in ill-gotten gains in response to charges that it deceptively installed adware onto PCs without user consent and then obstructed its removal, violating federal law.

Zango’s co-founders Keith Smith and Daniel Todd will be responsible for paying the hefty sum, it was announced today. Under terms of the settlement, Zango also must refrain from installing software, without easy removal instructions, onto customer computers that can be monitored remotely without the user consent.

The settlement was not a fine levied by the FTC, nor an admission of guilt by Zango.

"Consumers' computers belong to them, and they shouldn't have to accept any content they don’t want," said Lydia Parnes, Director of the FTC's Bureau of Consumer Protection. "If consumers choose to receive pop-up ads, so be it. But it violates federal law to secretly install software that forces consumers to get popups that disrupt their computer use."

The FTC said Zango used third parties to install adware. Programs named Zango Search Assistant, 180Search Assistant, Seekmo and n-Case monitors consumers’ Internet use in order to display relevant popup advertising. Zango has been installed on PCs more than 70 million times and has served more than 6.9 billion popup ads.

“The FTC alleges that Zango’s distributors — third-party affiliates who often contracted with numerous sub-affiliates — frequently offered consumers free content and software, such as screensavers, peer-to-peer file sharing software, games, and utilities, without disclosing that downloading them would result in installation of the adware,” the FTC’s statement said. “In other instances, Zango’s third-party distributors exploited security vulnerabilities in web browsers to install the adware via ‘drive-by’ downloads. As a result, millions of consumers received pop-up ads without knowing why, and had their Internet use monitored without their knowledge.”

In an official statement on its corporate blog, Zango blamed its affiliates for the mess.

“Early in our business, and as we’ve acknowledged, we relied too heavily on our affiliates to enforce our consumer notice and consent policies,” Zango CEO Keith Smith said. “Unfortunately, this allowed deceptive third parties to exploit our system to the detriment of consumers, our advertisers and our publishing partners. We deeply regret and apologize for the resulting negative impact.”

The FTC alleges that Zango purposely made it difficult to identify, locate and remove its adware installations. Ultimately, “Zango failed to label its popup ads to identify their origin, named its adware files with names resembling those of core systems software, provided uninstall tools that failed to uninstall the adware, gave confusing labels to those uninstall tools, and installed code on consumers’ computers that would enable the adware to be reinstalled secretly when consumers attempted to remove it.”

Most importantly, the settlement bars Zango from “using its adware to communicate with consumers’ computers — either by monitoring consumers’ web surfing activities or delivering pop-up ads — without verifying that consumers consented to installation of the adware.” It also prohibits the company and its affiliates from exploiting security vulnerabilities to download software, and requires the company to disclose a plain language installation consent form. Finally, Zango must monitor third-party distributors and affiliates to make sure they comply with the FTC order.

The FTC vote to accept the proposed agreement was 5-0. The agreement now is open for public comment beginning today through Dec. 5.

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