Cyberheat Settles With FTC Over Illegal Spam Charges Related to Affiliates

Tom Hymes
TUCSON, Ariz. — Resolving a case that has been ongoing since 2005, Arizona-based Cyberheat has entered into a settlement with the Federal Trade Commission and the Department of Justice over charges that the company violated federal law by “...illegally expos[ing] unwitting consumers, including children, to graphic sexual content...”

Cyberheat and six other companies were accused of violating several provisions of the CAN-SPAM Act. In addition to this settlement, five of the other cases have been settled, and one company, Impulse Media Group, is still contesting the charges in court.

Under terms of the agreement, Cyberheat will pay a civil penalty of $413,000 and agree to not engage in illegal marketing practices. The company also will be required to monitor its affiliates to ensure that they comply with the law, and the settlement contains bookkeeping and record keeping provisions that allow the FTC to monitor the company for compliance of the terms.

The FTC has never asserted that Cyberheat itself sent illegal spam, but has instead made the claim that “...they operated an ‘affiliate marketing’ program in which they paid others who used spam to drive traffic to Cyberheat’s Web sites.”

The federal agency also claimed that under the CAN-SPAM Act, the defendants were liable for illegal spam sent by their affiliates, “because the defendant induced them to send it by offering to pay those who successfully attracted subscriber[s] to its Web sites.”

Specifically, the FTC charged that affiliate marketers sent sexually explicit email messages that:

  • Violated the Adult Labeling Rule requirements;
  • Violated the requirement to provide a clear and conspicuous opt-out mechanism;
  • and
  • Violated the requirement to provide a postal address.

By entering into this agreement, however, the government acknowledges that Cyberheat has not admitting violating any law.