Alyon Blasts FTC, May Seek Compensation

Rhett Pardon
NEW YORK – Alyon Technologies Inc. on Tuesday threatened to seek compensation from the Federal Trade Commission if it doesn’t come to “satisfactory” terms in a case against the online adult billing processor.

XBiz has learned that New York-based Alyon has asked for a status conference in U.S. District Court following the FTC’s admission last week that it incorrectly published a press release stating it prohibited the company from billing online adult providers.

Alyon CEO Stephane Touboul claims the FTC’s release on its website was “designed to undermine Alyon’s ability to remain in business.”

Federal regulators said the October release indicated erroneously that the court had prohibited Alyon from “billing, collecting, or attempting to collect payment” for services the company rendered via a deal with providers of online adult content.

The FTC said that the court did not prohibit billing but, instead, set forth the parameters under which Alyon may continue to conduct business.

The FTC and 13 state attorneys general charged last year that Alyon was illegally billing and collecting for videotext services accessed on the Internet.

The regulators claim that Alyon used a modem dialing program that disconnected consumers from their own Internet service providers and reconnected them to the Internet sites Alyon billed for without the consumers’ authorization or approval.

Using the dialing program, the FTC said that Alyon captured the telephone number used by the modem and matched it against several databases of line subscriber information. The agency said the databases frequently contained errors.

The line subscribers identified as responsible for the captured telephone number later received bills charging them $4.99 a minute for each minute the defendants claim videotext services were purchased, regardless of whether the line subscribers authorized the purchase, the FTC said.

The FTC, which did not return phone calls from XBiz on Tuesday, said in a memo last week that “An FTC employee, while handling consumer complaints about Alyon’s billing practices, altered one of the affidavit forms prescribed by the court ... and distributed such altered affidavits to a number of consumers.”

The affidavits included paraphrased explanations of the judge’s ruling, which the company knew to be misrepresentations, Touboul said.

“The FTC’s statements were directly contrary to Judge [R.W.] Story’s order which preserved our right to bill and collect from consumers,” Touboul said. “Once we were made aware of the FTC’s actions, it was clear to us that we needed to bring this matter to the immediate attention of the commission to put a stop to the dissemination of these misleading affidavits.”

Touboul said that Alyon wants to “move forward and potentially enter into a fruitful dialogue to end this case without further litigation.”

But Touboul warned that if a "satisfactory" agreement can’t be reached with the regulators, “Alyon will proceed to vigorously defend itself in court and will pursue its legal rights to seek compensations from the FTC for its admitted wrongful conduct.”