'Free Software' Scammers Fined $2.2 Million

from the this-is-not-the-'free'-business-model-we're-talking-about dept

Fri, Jun 13th 2008 4:38pm — Mike Masnick

We've seen various incarnations of the scam (often found in infomercials) where a company offers you something for "free," but in the fine print, you're really signing up for an ongoing paid service. For years, some of the biggest "ringtone" companies made much of their money this way, offering "free" or cheap ringtones that actually involved the user signing up for a monthly service without realizing it. The infamous "Video Professor" has been accused of running a similar system, though the company vehemently denies this.

Either way, it appears that the FTC is starting to crack down on some of these practices, fining a competitor to "Video Professor," called ThinkAll, $2.2 million. Apparently ThinkAll took this scam to a new level. It offered "free" software, where you simply had to pay for the shipping and handling -- though, it sounds like that was really just so the company could get your credit card on file. After receiving that first free CD, customers were offered 3 more titles totally free (not even any shipping). If you decided to accept that software (and why wouldn't you?) it made you check a box saying you had read the terms of service. Of course no one reads the full terms of service, which include (hidden down in the 7th paragraph) the fact that in accepting this "free" software, you're actually agreeing to sign up for a monthly fee-based service. Quite sneaky... until the FTC stepped in. Hopefully other businesses take notice and start avoiding these types of scams.

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Filed Under: fine, fine print, free software, ftc, scam, terms of service
Companies: thinkall

32 Comments

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Jake, 13 Jun 2008 @ 5:03pm

Frankly, anyone dumb enough to fall for that one deserves to get screwed over.
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Anonymous Cowherd, 13 Jun 2008 @ 5:27pm

What?!
Have you no sympathy? This was clearly a deceptive practise and the FTC obviously thought so too. Nobody "deserves" to get screwed over unless something is obviously (rather than subtly) fishy.
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anne, 13 Jun 2008 @ 5:41pm

There is no such thing as a free lunch. I will gladly accept free offers from companies that don't require that I pay s&h charges (because that involves giving them my credit card number). However, just because some people (okay a whole lot of people) are extremely stupid and gullible, that doesn't mean it's okay to take advantage of them through deceptive and fraudulent business practices. I am extremely comfortable with the FTC doing their job and sticking it to these bastards with a fine, although they could just file bankruptcy and walk away from it.
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Anonymous Coward, 13 Jun 2008 @ 5:58pm

Deceptive?
I just don't see haw this qualified as "deceptive" by today's business standards. The terms were spelled out right there in black and white. Banks, phone companies, etc. all do this kind of thing so what makes this company different? Did they just tick off the wrong government official?
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Anonymous Coward, 13 Jun 2008 @ 6:03pm

Re: What?!
Have you no sympathy?

Sympathy is for LOSERS.
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Agonizing Fury, 13 Jun 2008 @ 6:15pm

No different than Vonage. They hide their 2 year agreement so far down in the fine print that you would never find it unless you were looking for it. Then when you have technical issues with it, they string you out just past the 30 day trial period, then tell you to deal because you're in a contract and can't cancel without paying them a disconnect fee. I'm no fan of the incumbent telcos, but at least they tend to be a little more upfront about these things.
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zcat, 13 Jun 2008 @ 6:21pm

damn, when I saw the title I thought you were talking about the guys on ebay who sell the Ultimate Boot CD for $50 ..
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MrScott, 13 Jun 2008 @ 6:37pm

Dirty Underhanded Business Practices
You know another company who did the same practice? The practice of sending the victims (oh, excuse me...I mean CLIENTS) a 30 day supply of their product.? And if you didn't like their product, you called and were finished with that company, right? WRONG!!

In order for you to get your 30 day supply of this product, you had to agree to an "automatic enrollment" with this company, which locked you into an agreement (if you didn't fully read and understand just what you were getting yourself into) that left the victims (did I say that word again?? I meant customers, [sarcasm of course] trying to cancel their "enrollment" with this company, who kept on charging the people's credit cards and checking accounts for quite some time, even when they requested to stop the business relationship completely. This is what lead to a lawsuit and the company had to temporarily stop selling the product. But, now they're back in business, and still in commercials.

Before I go any further with this story, I'll let you know what I'm talking about. All I have to say is 6 little words, and you'll know what the product is. How about "Hey, it's our good friend Bob"! at the start of the commercial. That commercial pis*ed me off each and every time it came on, I wanted to throw the remote at the TV. No matter what channel I'm watching, it's on at least 20 times in the evening. It's almost like they're thinking that men in this region of the country have a penis problem, and NEED these pills in order to survive. What a crock of...well, you get the idea.

A business that treats their customers well, will survive in the end, compared to these "fly-by-night" companies that spring up out of nowhere, make all the money they can, and then leave town, leaving the victims scratching their heads wondering how to get their money back because the automatic enrollment had print so fine, that even the best microscope can't make out the words.

It's a sad, sad world we live in. (sigh)
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Thomas, 13 Jun 2008 @ 6:55pm

Those aren't scams, it's stupid people signing into contracts without reading the documents.
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Jason (profile), 13 Jun 2008 @ 7:41pm

Stupid or not...
Yeah, it was dumb of them, but their claims are valid because their credit card info was given for the shipping and handling with NO TOS in view. The company had no business obtaining the CC info under false pretenses to rip them off after the fact. That's pretty close to de facto fraud.
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anne, 13 Jun 2008 @ 8:01pm

A man who buys penis enhancement vitamins over the Internet or through an infomercial gets exactly what he deserves. The same man who gets suckered into buying 'free software' with undisclosed or deeply buried 'gotchas' has been scammed, and IMHO, is deserving of government intervention to punish the company that misled him.
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Anonymous Coward, 13 Jun 2008 @ 8:07pm

Still don't know which product this is or which company.
Any more clues?
Or spell it out for us?

BTW: these companies are fraudulent scumbags and the owners deserve to have all their money taken away and be locked up.
Obviously they are trying to rip people off by hiding the automatic renewal hidden in the fine print and expecting the victim not to notice.
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Another AC, 13 Jun 2008 @ 8:14pm

Victims of fraud re: post by anne
What *does* "a man who buys penis enhancement vitamins over the Internet or through an infomercial" deserve?
How is he different from "man who gets suckered into buying 'free software'" other than the product he was promised?
Are gullible people unworthy of protection? Maybe they're objects of derision to some, but what about the scammers who suckered both?
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C Star, 13 Jun 2008 @ 8:55pm

internet scammers or just all scammers
These are the people I would pay to see beheaded by those machete wielding Jihadi crazies.

Get that shit on Pay Per View and I will sign up for every damned huckster that loses his head ($40.00 per head would be a reasonable price).

I would even pay higher fees for corporate execs who let pensions be robbed on their watch ($100.00 per head).
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Anonymous Coward, 13 Jun 2008 @ 9:08pm

am i the only one that thinks there's something wrong with the fact that customers have to read and agree to a 50-100+ page document for... just about ANY software, ANY service, ANY trial, beta, account, purchase, profile, or any transaction? Yes it's written in plain letters what you'll be receiving - only issue being of course that you'd need a lawyer or months worth of reading and analyzing to even find and understand these words.

These companies should be force into chapter 11 bankruptcy with 100% of their worth and revenue being divided evenly among all victims/customers
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Anonymous Coward, 14 Jun 2008 @ 3:03am

Re: Re: What?!
Lack of it is for psychos.
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Reason, 14 Jun 2008 @ 3:08am

Re: internet scammers or just all scammers
I seriously hope you are speaking hyperbolically, because otherwise you are a seriously deranged individual.
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Rod, 14 Jun 2008 @ 3:59am

Well Stupid!
Yeah, its obviously scummy business practice, however, they did spell it out right there in the terms and conditions and it’s your own fault if YOU don't read the details! WTF?!

I say; don't read the details then don't bitch if you get screwed! That'll teach ya!
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Jake, 14 Jun 2008 @ 6:24am

Re: What?!
I'm sorry, but the whole thing just screamed 'scam' to me. This particular trick is older than the internet; two or three flyers for outfits using broadly similar tactics fall out of every copy of SFX or Model Railway Magazine I've ever bought.
Yes, the TOS was poorly laid out and hard to read; that's probably a violation. But frankly, that should have been a clue that something was up. I don't know how anyone gets old enough to obtain a checking account without acquiring at least that much common sense.
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Anonymous Coward, 14 Jun 2008 @ 6:43am

Actually, I fell for this, sort of...

It was a vitamin (B) free month supply offer through Men's Health magazine in the early 90s. I pulled the coupon and sent it off, I did not provide any CC or pay any shipping. A few weeks later, my month supply of vitamins came. Cool, and never gave it a second thought.

Problem was, next month, a new month's supply came, then after that another month's supply and I never agreed upon accepting anything other than the free month. About 7-8 months later, they stopped sending them, but of course then letters from a collection agency started... I was in the army, they were shipping to a APO box #, I told them I had no idea who they were calling in reference to. Back then I had no idea what credit reports were about, but I never supplied anything but an address. So I guess I was smart in that aspect.

Luckily for me, my scammer was dumb. Never had to pay for those vitamins, didn't really trust them enough to use them either though.... so I guess no one won.
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Chase, 14 Jun 2008 @ 8:14am

There is a Simple Solution
Assuming an individual is using a credit card to make such a transaction, then the ONLY type of credit card to use is a throwaway number. Bank of America offers such a service, and I know there are others.

You create a number for the exact amount of the transaction and allow the number to only live for 2 months. When the merchant has charged your card for what you agreed to purchase, then cancel the number. Don't cancel right after placing the order because that's fraud and that makes you the bad guy.

I had an ongoing problem with XM Radio when they attempted to bill my canceled card number for another year's subscription. When they couldn't bill it, the actually turned me over to a collection agency called CCA! That company repeatedly made calls to me demanding I pay up. When I wrote to XM and CCA demanding they stop and threatening legal action, the calls and collection efforts stopped. I asked them to explain how they thought putting a customer with a declined credit card into collections was good customer service.

Can you hear the crickets chirping?

Cancel your existing credit card and get one with this type of service. For online transactions, it's the best weapon a consumer has.
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Anonymous Coward, 14 Jun 2008 @ 12:51pm

Re:
nope you are not the only one.
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Anonymous Coward, 14 Jun 2008 @ 6:35pm

Re: Re: Re: What?!
Said the loser.
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Anonymous Coward, 14 Jun 2008 @ 6:37pm

Re: Re: Re: What?!
Lack of it is for psychos.
What? You have no sympathy for the mentally ill?
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John (profile), 14 Jun 2008 @ 6:49pm

Yes there are free services, but...
... read the fine print!

The best example of this is the freecreditreport.com commercials: they're the company that offers free credit reports with (some service that they would say in a really fast whisper). After some "persuasion" by the government, the commercial finally says "offer good with enrollment in Triple Advantage".
What's Triple Advantage? They don't say on the commercial, but I've heard it's $39.95 a month until you cancel.

And yes, you can get your credit report for free if you do your research: all of the credit agencies offer a free report once a year.

The warning sign is when someone asks you for your credit card for a free item. Free is free: they shouldn't need to charge your card for a "processing fee" (or whatever they call it).
Yet people seem to ignore this obvious sign. The big question is whether the government should step in and protect these people.
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Leigha, 15 Jun 2008 @ 12:21am

Find sympathy in between shit & syphilis in dictionary
I do agree it's somewhat deceptive, but if you *neglect* to read the terms and then check the box *anyway*, the onus of accountability & responsibility falls on *you*!

Are gullible people unworthy of protection? Of course they need protection! It's the gullible people who don't read terms who are unworthy!

If you "need a months worth of reading & analyzing to even find & understand these words", THEN DON'T CHECK THE BOX SAYING YOU *AGREE* TO THE TERMS!!! (You do understand that part, don't you... that you are AGREEING to THEIR terms? You didn't need a month to understand that much, did you?)

As for those who (really quite stupidly) hand over their credit card info (clearly they also neglected to read the terms of their credit card application too), how many times do they need to get ripped off before they seek a different way of making the first few payments until it can be determined whether or not the company is trustworthy?

USE YOUR HEAD PEOPLE... ask for an address so you can send a money order or a cheque / check by snail-mail instead. If the company doesn't want to accept payment that way then be suspicious (after all, are credit card holders the only ones allowed in on the "deal"?)

I cannot say it enough: it is irresponsible & neglectful to check the box without reading the terms!

If *YOU* choose to check the box without reading the terms, you can seek "sympathy" between "shit" & "syphilis" in the dictionary!
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Matt, 15 Jun 2008 @ 10:42am

Re: What?!
Ya know, I'm tired of people taking the "oh, those poor bastard" viewpoints on things like this. Are the companies doing something fishy? Of course they are, that's a given! It's a fact... a certainty... even a definition that a business is an organization that is in the business of making money. Did these people think that Company X was sending them free software out of a sense of corporate citizenship? The 'Buddy Corporation,' if you will? Really? These 'poor bastards' thought that?

When in doubt, READ THE FUCKING CONTRACT. That's what it's there for. If you are old and (I would hope) smart enough to sign your name, then you're smart enough to read, process and understand what you're signing. If not, then, as Jake said, you kinda deserve what happens to you.

It's shit like this... People blindly signing away on little pieces of paper... that have caused first the housing crisis (no verifiable income? Not a citizen? No credit? Shitty credit? Hey, YOU TOO can own a $250k home with nothing down!), and now the looming credit crisis. Nobody bothers to read the contracts that they're entering into, and nobody notices until they start receiving the phone calls throughout the day hounding them for the money that they owe.

Hello? Is this thing on? (tap tap tap) CORPORATE AMERICA IS COUNTING ON YOUR IGNORANCE. CORPORATE AMERICA IS OUT TO GET YOU, AND THEY KNOW THAT YOU DON'T READ THE FINE PRINT.

They covered their asses by putting it in the contract, knowing full right well that Joe D. American is too lazy/stupid/gullible to read it. AND they know that if Joe D. American (or his wife Jane D. American or their friend LaQuandrashel D. American; part of being equal is owning up to your own shortcomings and mistakes!) actually took the time to READ the terms and conditions, then few people would sign.

Take responsibility for your own actions, quit crying and expecting the Gummint to come to your rescue. Hell, they outsourced writing the laws to the corporations!
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Steve R. (profile), 16 Jun 2008 @ 5:57am

Computer Does All the Work For You
While the money just roles in. In fact you don't even have to buy or store these high end products!!! I have been hearing this dubious add for some time. It is so obviously misleading that I am surprised these guys are still able to advertise. But then the Video Professor is still be in business too.

Future fodder for TechDirt.
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www.custompcmax.com, 16 Jun 2008 @ 6:51am

Good, I am glad one of these scam companies is getting what it deserves. One side of me says, of course it is a scam. BUt, I can understand how some people can fall victim to this. It all seems very real and trustworthy. The problem is that most people expect that businesses want to take care of their customers. But, the sad reality is that there are many "companies" who's sole goal is to do whatever they can to get your money. Even if it pisses off their customer base. They get the money, and shut down when the negative press gets to be too much.

Basically, if it seems to good to be true, then it probably is. http://www.custompcmax.com
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Anonymous Coward, 16 Jun 2008 @ 8:22am

I got stuck with a coffee-of-the-month club after accepting a 'free' coffee maker. It took the threat of a lawsuit to get the company to stop charging my credit card. Since then I never use my CC to buy anything on the internet. Instead I use virtual credit cards with a credit amount just slightly more than the purchase price and short validity time span (1-2 months).
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Gluefreak, 16 Jun 2008 @ 10:19am

Let's be real. Nobody reads Terms of Service agreements. They're legalese designed to bludgeon the reader precisely into NOT reading them.

TechDirt is always looking at new business models, new ways of doing business online, new ways of handling intellectual property. How about we start looking at new ways of issuing TOS? There could be a sort of Creative Commons TOS, a boilerplate all companies could use and all consumers could feel confident about.

It should also be mentioned that it's not just companies offering free goods that pull these scams. Any of you ever tried Intelius? The place offers a legitimate service -- information retrieval -- but adds a spurious "survey" scam onto it using completely deceptive terms.

http://www.techcrunch.com/2008/05/29/naveen-jains-intelius-prepares-to-go-public-how-much-of-the ir-revenue-is-a-scam/

I'll bet any number of the technologically sophisticated people who read TechDirt could fall for this scam.
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Wayne, 16 Jun 2008 @ 10:24am

I have only little sympathy
My sympathy is as follows, fool me once shame on you, fool me twice shame on me, fool me three times, well take away my rights i'm stupid. By now anyone with any internet experience knows if it's free and they want a credit card it's not free. Just good rule of thumb. That being said i feel for the new folks getting on the internet and there are a lot of them that just don't know better well they get a freebie for sympathy. So for these people yes i think the government should look our for them. It's these same people that buy stuff from reader's digest cause they're winners. Internet has just made it easier for these folks to get scammed.
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