Oregon Department of Justice

Attorney General Hardy Myers today announced a multi-state settlement that requires two companies providing billing and collection services for some online adult Web sites to change the way they do business and make it more difficult for children to access those adult sites.

Named in a general judgment filed today in Marion County Circuit Court are Alyon Technologies, Inc. of Secaucus, New Jersey and its CEO Stephane Touboul and Telcollect, Inc. of Norcross, Georgia. The companies, admitting no violation of law, agreed to make significant changes to their business practices and pay Oregon and 22 other participating states a total of $285,000 in settlement of a lawsuit filed by the Attorneys General.

Most of the 103 victims that filed complaints against Alyon with the Oregon Attorney General's consumer protection office claimed that they were billed for access to adult web sites they say they did not access and did not agree to purchase. In some cases, consumers said their children were exposed to or accessed the adult sites without their parents' permission although the parents were later billed. Under most circumstances, contracts with minors are not enforceable. The multi-state lawsuits alleged the defendants had no basis to demand parents pay charges when parents did not agree beforehand to pay them.

"Oregonians using the Internet should learn from this case that unscrupulous companies are just a click away from 'highjacking' their modems and charging them without their knowledge or consent," Myers said. Consumers have reported that by clicking on an innocent looking "pop-up," "bubble," or spam, they triggered the download of modem dialer software, were cut off from their own service provider and connected to a phone line in New Jersey.

"This case also reminds Oregon families of the need for adult supervision when kids are using the computer," Myers added.

The states' lawsuits alleged the defendants would start billing consumers after unsuspecting adults or minors without permission opened pop-up windows or spam that automatically downloaded modem dialer software onto their computers. That software could then be used to dial up the Alyon billing gateway to access adult material. Alyon captured the phone number, matched it with a name and address and then billed the consumers $4.99 per minute, allegedly without the consumers' knowledge or consent. Alyon allegedly told consumers they owed the charges even when consumers denied having accessed or agreed to purchase the adult materials.

The service also allegedly was set up to allow children to easily access the adult sites because no credit card numbers were required and 900 number blocks were ineffective because people were unknowingly connected to a number with a New Jersey area code. The defendants billed consumers in amounts ranging from less than $100 to more than $700.

The provisions contained in today's settlement include:

• Alyon must improve its process for ensuring that adults authorized to incur charges are on the other end of the modem before connecting them to the adult material or starting the clock on per minute charges.
• Alyon will provide consumers with a free utility program they can download to remove all modem dialer software deposited by their clients, the adult web site operators.
• Alyon will require the adult web site operators to refrain from using potentially deceptive methods to download modem dialer software onto consumers' computers. Such prohibited methods include impairing a computer user's ability to read the terms and conditions of the software download; disabling a computer user's ability to close out a pop-up box; depositing spyware on consumers' computers; and impairing the add/remove controls within computers' operating systems, which would make it difficult for consumers to detect and remove the modem dialer software.
• The defendants automatically will credit certain eligible consumers' bills and provide cash refunds available to a small group of eligible consumers who previously had paid disputed Alyon charges.
• Consumers billed for charges allegedly incurred before June 15, 2003, but who do not qualify for an automatic bill credit or cash refund will have an opportunity to request a credit of disputed charges. However, they must follow a procedure for making such a request, which includes completing and returning an affidavit to the defendants within 45 days of the defendants' collection attempt.

Consumers wanting more information on the settlement and other consumer protection issues may call the Oregon Attorney General's consumer hotline at (503) 363-4320 (Salem area only), (503) 229-5576 (Portland area only) or toll-free at 1-877-877-9392. Justice is online at www.doj.state.or.us.