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Playgirl.com Operators to Pay $30 Million to Settle FTC Charges

Agency Alleged Adult Web Sites Illegally Billed Consumers for Web Access Advertised as Free

The owners and operators of www.playgirl.com, www.highsociety.com and scores of other adult entertainment Web sites will pay $30 million to settle Federal Trade Commission and New York State's Attorney General's charges that they illegally billed thousands of consumers for services that were advertised as "free," and billed other consumers who never visited the Web sites at all. The settlement bars the illegal practices in the future, and requires that the defendants post a bond - $2 million for the corporate defendants and $500,000 each for the individual defendants - before they are allowed to continue to market adult entertainment on the Internet.

In August, 2000, the FTC and the New York Attorney General filed suit in U.S. District Court seeking to halt the illegal billing practices. The suit named New York-based Crescent Publishing Group, Inc., its principals, Bruce Chew and David Bernstein, and 64 affiliated corporations that operate the adult entertainment Web sites. According to the complaint, the defendants operated scores of adult entertainment Web sites, deceptively promoting them as "free." The "Free Tour Web Sites" claimed that consumers' credit card numbers were required solely to prove that the consumers were of legal age to view the adult material, and that the credit cards would not be billed. Consumers complained, however, that their cards were billed despite the representations, and other consumers were billed even though they did not visit the defendants' Web sites. Thousands of consumers were charged recurring monthly membership fees ranging from $20 to $90, the complaint alleged. Consumers who tried to dispute the charges were met with a variety of barriers designed by the defendants to thwart their efforts. According to the complaint, the defendants used billing names different than the names of the Web sites, so consumers often had no idea who was billing them or why. Moreover, consumers often had difficulty contacting the defendants to get refunds from the information provided to them on their billing statement.

The Court issued a preliminary injunction that required clear and conspicuous disclosure of charges for any "free" tour of their Web sites and barred the defendants from "charging, debiting or billing consumers" for any Web site services without first obtaining a $10 million bond that could be used "to satisfy any judgment entered against the defendants," following trial. The settlement announced today concludes the case without further litigation.

The settlement bars the defendants from making any misrepresentations in advertising, promoting, offering for sale or selling any products or services. Specifically, it bars them from making misrepresentations about the cost and terms of Web site access, and deceptive representations that credit account information will be used only for age verification. It further bars them from billing any consumers without their prior authorization and requires clear disclosure regarding the amount consumers will be charged and procedures for cancellation before consumers sign up for membership at defendants' sites. If the defendants continue to advertise "free tours" of their adult sites, the settlement requires clear and conspicuous disclosure about: how consumers can exit their sites without incurring charges; when the "free tour" has ended; and that by continuing, consumers will incur fees. The settlement also requires payment of $30 million for consumer redress. In the event that redress proves impractical, the $30 million in ill-gotten gains will be divided equally and turned over to the United States Treasury and the State of New York. The corporate defendants will be required to obtain bonds in the amount of $2 million before marketing adult entertainment on the Internet in the future. Each individual defendant will be required to obtain a bond in the amount of $500,000. Finally, the settlement contains record keeping provisions to allow the FTC to monitor compliance.

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