United States of America v. Impulse Media Group Inc

Filing 2

AMENDED COMPLAINT for Civil Penalties, Permanent Injunction, and Other Equitable Relief against defendant(s) United States of America, filed by United States of America.(Kipnis, Brian)

United States of America v. Impulse Media Group Inc

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UNITED STATES DISTRICT COURT WESTERNDISTRICT OF WASHINGTON

UNITED STATES OF AMERICA, No. CV05-1285L Plaintiff,
V.

IMPULSEMEDIA GROUP, INC., a Washington corporation, Defendant.

AMENDED COMPLAINT FOR CIVIL PENALTIES, PERMANENT INJUNCTION, AND OTHER EQUITABLE RELIEF

Plaintiff, the UnitedStates of America,acting uponnotification mad authorization to the Attorney General by the Federal Trade Commission ("FTC"or "Commission"),pursuant

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U.S. Department Justice of P.O. Box 386 Washington, D.C. 20044 [phone]

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to Section 16(a)(1) of the Federal Trade Commission ("FTCAct"), 15 U.S.C. § 56(a)(1), Act for its Complaint alleges: 1. Plaintiffbrings this action under Sections 5(a), 5(m)(1)(A),13(b), 16(a), the FTC Act, 15 U.S.C. §§ 45(a), 45(m)(1)(A),53(b), 56(a), and 57b, and under of the Controlling the Assault of Non-Solicited Pornography MarketingAct of 2003 and ("CAN-SPAM" the "CAN-SPAM or Act"), 15 U.S.C. § 7706(a), to secure civil penalties, permaneninjunction, and other equitable relief for Defendant'sviolations of Section 5(a) and t (d) of CAN-SPAM, U.S.C. § 7704(a) and (d), and the FTC'sAdult Labeling Rule 15 "Adult Labeling Rule" or the "Rule"), 16 C.F.R. Part 316.4. JURISDICTION AND VENUE 2. Subject matter jurisdiction is conferred uponthis Court by 15 U.S.C. §§ 45(m)(1)(A),53(b), 56(a), 57b, and 7706(a), and 28 U.S.C. §§ 1331, 1337(a), 1355. This action arises under 15 U.S.C. § 45(a). 3. Vennein the UnitedStates District Court for the WesternDistrict of Washington is proper under 15 U.S.C. § 53(b) and 28 U.S.C. §§ 1391(b)-(c), and 1395(a). DEFENDANT 4. DefendantImpulse MediaGroup, Inc., is a Washington corporation with its registered agent, CarpelawPLLC,located at 500 UnionStreet, Suite 510, Seattle, WA 98101. Since May19, 2004, Impulse MediaGroup,Inc. has formulated, directed, controlled, or participated in the acts or practices set forth in this Complaint.ImpulseMedia Group,Inc.

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U.S. Department Justice of P.O. Box 386 Washington, D.C. 20044 [phone]

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resides in the WesternDistrict of Washington transacts business within the District and and throughoutthe United States. COMMERCE 5. At all times relevant to this Complaint,Defendanthas maintaineda substantial course of trade in or affecting commerce, "commerce" defined in Section 4 of the FTC as is Act, 15 U.S.C, § 44, DEFENDANT'S BUSINESS PRACTICES 6. Since May19, 2004, and continuing to the present, Defendanthas ownedand operated dozensof commercial sites that sell access to a vast collection of sexually web oriented videos and pictures. Defendantpromotesthese sites through an affiliate program that pays "webmasters" steer consumersto Defendant'ssites. Defendant'saffiliate program to also provides a number other services to affiliated webmasters, of including free webhosting, marketing promotional and tools, and real-time access to detailed sales statistics. 7. Many webmasters participate in Defendant'saffiliate who programadvertise and

promoteDefendant's commercialwebsites through widely distributed commercialemail messages.Theseemail messagesoften contain sexually explicit pictures and stories that hyperlink to Defendant'swebsites. The hyperlinks in the email messagesallow Defendantto identify a particular webmaster the entity deserving paymentwhena potential customer as clicks through an email to one of Defendant'ssites. Since May 2004, numerous 19, email messagesthat advertise and promote Defendant's commercialwebsites have been mailed to computersused in interstate Amended Complaint - Page 3 or foreign commerce communication. and U.S. Departmentof Justice P,O. Box 386 Washington, D.C. 20044 [phone]

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8. In connection with the marketing and promotion of Defendant's commercialweb sites, Defendant,through its affiliate program,has inducedothers, by monetarypayments and other consideration, to transmit commercial email messageson Defendant'sbehalf. In doing so, Defendanthas procuredthe transmission of such messagesand is thereby an initiator, as that term is defined under CAN-SPAM, email messagessent by its affiliates of the that

promoteand market Defendant'swebsites. In addition, because Defendant's websites are being advertised or promoted such messages,Defendantis also a sender, as that term is by defined under CAN-SPAM,the email messagesthat its affiliates are transmitting on of Defendant'sbehalf. 9. In connection with the marketing and promotion of Defendant's commemial web sites, Defendant's affiliates havetransmitted email messages that fail to include clear and conspicuousnotice of a recipient's opportunity to decline to receive further commercial email messagesfrom Defendantat the recipient's email address. For example, in numerous instances, the opt-out mechanism displayed in a small font at the bottomof the email is message after a depiction of people engagedin sexual intercourse. 10. In connection with the marketing and promotion of Defendant's commercialweb sites, Defendant's affiliates havetransmitted email messages that fail to include a valid physicalpostal address of Defendant. 11. In connection with the marketing and promotion of Defendant's commercialweb sites, Defendant'saffiliates have transmitted email messages that contain depictions of

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sexually explicit conduct and that fail to include the phrase "SEXUALLY-EXPLICIT: "in the subject line of the message. 12. In comaection with the marketing and promotion of Defendant's commercialweb sites, Defendant'saffiliates have transmitted email messages that contain depictions of sexually explicit conductand that fail to include, in the initially viewablearea of the message, the phrase "SEXUALLY-EXPLICIT: functioning opt-out mechanism,or a valid physical ", a postal address of Defendant. 13. In connection with the marketing and promotion of Defendant's commercialweb sites, Defendant'saffiliates havetransmitted email messages that include sexually oriented materials in the initially viewablearea of the message. 14. In numerous instances, recipients of the commercial email messagesset forth in paragraphs 11 through 13 have not given prior affirmative consent to receive such messages. THE CAN-SPAM ACT 15. The CAN-SPAM 15 U.S.C. § 7701 et seq., becameeffective on January 1, Act, 2004, and has since remained full force and effect. in 16. Section 3(2) of the CAN-SPAM 15 U.S.C. § 7702(2), defines "commercial Act, electronic mail message"to mean: any electronic mail messagethe primary purpose of which is the commercial advertisement or promotion of a commercialproduct or service (including content on an Intemet website operated for a commercialpurpose). 17. Section 3(9) of the CAN-SPAM 15 U.S.C. § 7702(9), defines "initiate," Act, whenused with respect to a commercialemail message, to mean: Amended Complaint - Page 5 U.S. Department Justice of P.O. Box 386 Washington, D.C. 20044 [phone]

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to originate or transmit such message to procure the origination or or transmission of such message,but shall not include actions that constitute routine conveyanceof such message. For purposes of this paragraph, more than one person maybe considered to have initiated a message. 18. Section 3(12) of the CAN-SPAM 15 U.S.C. § 7702(12), defines "procure," Act,

7 whenused with respect to the initiation of a commercialemail message, to mean: 8 9 10 11 intentionally to pay or provideother considerationto, or induce, another person to initiate such a message one's behalf. on 19. Section 3(13) of the CAN-SPAM 15 U.S.C. § 7702(13), defines "protected Act,

12 computer"by reference to 18 U.S.C. § 1030(e)(2)(B), which states that a protected computer 13 is: 14 15 16 17 18 19 a computerwhichis used in interstate or foreign commerce communication, or including a computer located outside the UnitedStates that is used in a manner that affects interstate or foreign commerce communication the United or of States. 20. Section 3(16) of the CA2,I-SPAM 15 U.S.C. § 7702(16), defines "sender," Act,

20 whenused with respect to a commercialelectronic mail message, as: 21 22 23 24 25 26 27 28 29 30 31 32 a person whoinitiates such a messageand whoseproduct, service, or Interact website is advertised or promotedby the message. 21. Section 5(a)(3) of the CAN-SPAM 15 U.S.C. § 7704(a)(3), Act, It is unlawfulfor any personto initiate the transmissionto a protected computerof a commercial electronic mail messagethat does not contain a functioning return electronic mail address or other Internet-based mechanism, clearly and conspicuously displayed, that (i) a recipient mayuse to submit, in a manner specified in the message, reply electronic mail messageor other fomaof haternet-based communication requesting not to receive future commercial electronic mail messagesfrom Amended Complaint - Page 6 U.S. Department Justice of P.O. Box 386 Washington, D.C. 20044 [phone]

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that sender at the electronic mail address where the messagewasreceived; and (ii) remains capable of receiving such messages or communications for less than 30 days after the transmission of the original message. 22. Sections 5(a)(5)(A)(ii) and (iii) §§ 7704(a)(5)(A) and(iii), (ii) (A) It is unlawfulfor any person to initiate the transmissionof any commercial electronic mail messageto a protected computerunless the messageprovides (ii) clear and conspicuous notice of the opportunity under paragraph(3) decline to receive further cormnercialelectronic mail messagesfrom the sender; and (iii) a valid physicalpostal addressof the sender. 23. The Commission promulgated the Adult Labeling Rule pursuant to Sections 5(d)(3) and 13(a) of the CAN-SPAM 15 U.S.C. §§ 7704(d)(3) and 771 l(a). Act, became effective on May 2004, and sets forth mm'ks notices to be included in 19, and commercial email messagesthat contain sexually oriented material. 24. Section 5(d)(4) of the CAN-SPAM 15 U.S.C. § 7704(d)(4), defines "sexually Act, oriented material" as: any material that depicts sexually explicit conduct (as that term is defined in section 2256of title 18, United States Code), unless the depiction constitutes a small and insignificant part of the whole, the remainderof which is not primarily devoted to sexual matters. 25. The CAN-SPAM and the Adult Labeling Rule both prohibit any person from Act initiating the transmission, to a protected computer,of any commercial email messagethat Amended Complaint - Page 7 U.S. Department Justice of P.O. Box 386 Washington, D.C. 20044 [phone] of the CAN-SPAM Act,

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includes sexually oriented material and fails to include the phrase "SEXUALLY-EXPLICIT: " as the first nineteen(19) characters at the beginningof the subject line. 15 U.S.C. 7704(d)(a)(A); 16 C.F.R. § 316.4(a)(1). 26. The CAN-SPAM madthe Adult Labeling Rule also require that any message Act that includes sexually oriented material place only the followinginformationwithin the content of the message that is initially viewableby the recipient, whenthe message opened is by the recipient and absent any further action by the recipient ("initially viewablecontent"): the phrase "SEXUALLY-EXPLICIT: a clear and conspicuous "in manner,15 U.S.C. § 7704(d)(1)(B)(i); 16 C.F.R. § 316.4(a)(2)(i); clear and conspicuous identification that the message an is advertisementor solicitation, 15 U.S.C. § 7704(d)(1)(B)(ii); 16 C.F.R.§ 316.4(a)(2)(ii); clear and conspicuousnotice of the opportunityof a recipient to decline to receive further commercial email messagesfrom the sender, 15 U.S.C. § 7704(d)(1)(B)(ii); 16 C.F.R.§ 316.4(a)(2)(iii); a functioning return email address or other Internet-based mechanismclearly and conspicuouslydisplayed, that a recipient , mayuse to submit, in a manner specified in the message,a reply email messageor other form of futernet-based communication requesting not to receive f~ature commercial email messagesfrom that sender at the email address wherethe messagewasreceived; Amended Complaint - Page 8 U.S. Department Justice of P.O. Box 386 Washington, D.C. 20044 [phone]

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and that remains capable of receiving such messagesor communications no less than 30 days after the transmission of for the original message,16 C.F.R. § 316.4(a)(2)(iv); clear and conspicuousdisplay of a valid physical postal address of the sender, 15 U.S.C. § 7704(d)(1)(B)(ii); 16 316.4(a)(2)(v); any needed instructions on howto access, or activate a mechanism to access, the sexually oriented material, 15 U.S.C. § 7704(d)(1)(B)(iii); 16 C.F.R. § 316.4(a)(2)(vi). 27. The labeling and placement requirements of the CAN-SPAM and the Adult Act LabelingRule set forth in paragraphs25 and 26 do not apply if the recipient has given prior affimaative consent to receipt of the message.15 U.S.C. § 7704(d)(2); 16 C.F.R. § 316.4(b). 28. Section 7(a) of the CAN-SPAM 15 U.S.C. § 7706(a), states: Act, [T]his Act shall be enforced by the [FTC]as if the violation of this Act were an unfair or deceptive act or practice proscribed under section 18(a)(1)(B) the [FTC Act] (15 U.S.C. § 57a(a)(1)(B)).

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COUNT I 29. Paragraphs 1 through 28 are incorporated by reference. 30. In numerous insta~aces, including but not limited to the practices set forth in this Complaint,Defendanthas initiated the transmission, to protected computers,of commercial email messagesthat include sexually oriented material and that: A. fail to include the phrase "SEXUALLY-EXPLICIT: first "as the nineteen(19) characters at the beginningof the subject line; fail to include, within the initially viewablecontent of the message, a second instance of the phrase "SEXUALLY-EXPLICIT: "; fail to include, within the initially viewablecontent of the message, clear mad conspicuousnotice of the opportunityof a recipient to decline to receive further commercialemail messagesfrom Defendant; fail to include, within the initially viewablecontent of the message, clear and conspicuousdisplay of a valid physical postal address of Defendant; or include sexually oriented material within the initially viewable content of the message. 31. Therefore, Defendant'sacts or practices, as described in paragraph30, violate Section 5(d) of the CAN-SPAM 15 U.S.C. § 7704(d), and the Adult Labeling Rule, Act, 16 C.F.R. § 316.4(a). Amended Complaint - Page 10 U.S. Departmentof Justice P.O. Box 386 Washington, D.C. 20044 [phone]

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COUNTII 32. Paragraphs 1 through 28 are incorporated by reference. 33. In numerous instances, including but not limited to the practices set forth in this Complaint,Defendanthas initiated the transmission, to protected computers,of commercial email messagesthat advertised or promoted Defendant'sInteract websites madfailed to include clear madconspicuous notice of the recipient's opportunity to decline to receive further commercial email messagesfrom Defendantat the recipient's email address. 34. Therefore, Defendant's acts or practices, as described in paragraph33, violate Section 5(a)(5)(A)(ii) and Section 5(a)(3) of the CAN-SPAM Act, 7704(a)(5)(A)(ii) and 7704(a)(3). COUNTIII 35. Paragraphs 1 through 28 are incorporated by reference. 36. In numerous instances, including but not limited to the practices set forth in this Complaint,Defendanthas initiated the transmission, to protected computers,of commercial email messagesthat advertised or promoted Defendant'sInteract websites and failed to include Defendant'svalid physical postal address. 37. Therefore, Defendant's acts or practices, as described in paragraph36, violate Section 5(a)(5)(A)(iii) of the CAN-SPAM 15 U.S.C. § 7704(a)(5)(A)(iii). Act, INDIVIDUAL AND BUSINESS INJURY 38. Individuals and businesses throughout the United States have suffered, and continue to suffer, substantial injury as a result of Defendant's unlawfulacts or practices. In Amended Complaint - Page 11 U.S. Departmentof Justice P.O. Box 386 Washington, D.C. 20044 [phone]

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addition, Defendant been unjustly enriched as a result of its unlawfulpractices. Absent has injunctive relief by this Court, Defendant likely to continue to injure consumers, is reap unjust enrichment,and harmthe public interest. THIS COURT'S POWERTO GRANTRELIEF 39. Section 7(a) of the CAN-SPAM 15 U.S.C. § 7706(a), provides that "[CANAct, SPAM] shall be enforced by the [FTC]as if the violation of this Act were an unfair or deceptive act or practice proscribed under section 18(a)(1)(B) of the [FTCAct] (15 § 57a(a)(1)(B))." Accordingly, violations of the CAN-SPAM including those sections Act, the CAN-SPAM that are interpreted by the Adult Labeling Rule, shall be enforced as if Act the violation were an unfair or deceptive act or practice proscribed under section 18(a)(1)(B) of the FTC (15 U.S.C. § 57a(a)(1)(B)), that is, these provisions shall be enforcedas Act violation had been a violation of an FTCtrade regulation role. Furthermore,Section 18(d)(3) of the FTCAct provides that "[w]henany rule under subsection (a)(1)(B) of [Section takes effect a subsequentviolation thereof shall constitute an unfair or deceptiveact or practice in violation of section 45(a)(1) of this title[.]" 15 U.S.C.§ 57a(d)(3). 40. Section 5(m)(1)(A) of the FTCAct, 15 U.S.C. § 45(m)(1)(A), as Section 4 of the Federal Civil Penalties Inflation Adjustment of 1990, 28 U.S.C. § 2461, Act as amended,madas implemented 16 C.F.R. § 1.98(d) (1997), authorizes this Court by award monetarycivil penalties of not morethan $11,000 for each violation of CAN-SPAM, including those sections of the CAN-SPAM that are interpreted by the Adult Labeling Act

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Rule. Defendant's violations of CAN-SPAM the Adult Labeling Rule were committed and with the knowledge required by Section 5(m)(1)(A) of the FTCAct, 15 U.S.C. § 45(m)(1)(A). 41. Section 13(b) of the FTCAct, 15 U.S.C. § 53(b), empowers this Court to grant injunctive and other ancillary relief to prevent and remedy violation of any provision of any law enforced by the FTC.

PRAYER FOR RELIEF WHEREFORE, Plaintiff requests that this Court, as authorized by Sections 5(a), 5(m)(1)(A), 13(b) and 19 of the FTCAct, 15 U.S.C. §§ 45(a), 45(m)(1)(A), and pursuant to its ownequitable powers: 1. Enter judgmentagainst Defendantand in favor of Plaintiff for each violation

alleged in this Complaint; 2. Award Plaintiff monetarycivil penalties from Defendantfor every violation

of the CAN-SPAM including those sections of the CAN-SPAM that are interpreted Act, Act by the Adult Labeling Rule;
p

Permanently enjoin Defendant from violating CAN-SPAM the Adult and

Labeling Rule; 4. 5. OrderDefendant pay the costs of this action; and to Award Plaintiff such other preliminary and permanent equitable relief as the

Court maydetermine to be just and proper.

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Dated: August 29, 2005 OF COUNSEL: EILEEN HARRINGTON Associate Director for Marketing Practices FEDERAL TRADE COMMISSION K. Michelle Grajales Attorney Federal Trade Commission 600 Pennsylvania Ave., N.W., Rm. 238 Washington, DC20580 PHONE:[phone] FAX: [phone]

Respectfully submitted, FOR THE UNITED STATES OF AMERICA PETERD. KEISLER, JR. Assistant Attorney General Civil Division U.S. DEPARTMENT JUSTICE OF JOHN McKAY United States Attorney

Brian C. Kipnis Assistant U.S. Attorneyfor the District of WesternDistrict of Washington 700 Stewart Street PHONE:[phone] FAX: [phone] EUGENE M. THIROLF Director Offic%of ConsumerLitigation

Jeffrey I. Steger Trial Attorney Office of Consumer Litigation U.S. Departmentof Justice P.O. Box 386 Washington, D.C. 20044 PHONE:[phone] FAX: [phone] [e-mail]

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U.S. Department Justice of P.O. Box 386 Washington, D.C. 20044 [phone]