• FTC Cracks Down on Pay-Up Pop Ups
  • January 31, 2007 | Authors: Jeffrey S. Edelstein; Linda A. Goldstein
  • Law Firm: Manatt, Phelps & Phillips, LLP - New York Office
  • Digital Enterprises Inc., which owns the video sites Movieland.com, Moviepass.tv, and Popcorn.net, has entered into an interim agreement with the Federal Trade Commission to limit its pop-up software and to inform users what the software will do beforehand.

    The original FTC complaint accused Movieland.com of flooding users’ systems with pop-up windows which played minute-long audio files and demanded that users pay a $29.95 fee to stop the notices from appearing. The pop-ups would appear after a three-day free trial period of the video service, during which users were required to cancel the service or pay for a subscription. The FTC said the pop-ups could not be closed or minimized and the software was “difficult or impossible” to remove.

    The agreement allows all three sites to continue to install the pop-up software, but limits their frequency to one per hour, five times a day, and no longer than 40 seconds in length. Pop-ups are also required to have a button to disable the audio and allow the notice to be covered by other browser windows.

    The end-under license agreement for all three sites requires users to opt-out in order to avoid the fee and pop-ups. Users are allowed a free three-day trial of the movie-viewing software and are required to cancel the service during that time in order to avoid activating the billing pop-ups. The agreement states that by not manually canceling within three days, users are agreeing to pay for the service.

    “During the trial period you may cancel by visiting the company homepage and clicking through the cancellation links,” the agreement states. “After the trial period, you must contact customer service (contact information is on the company homepage) to cancel and pay your outstanding balance, if any.”

    After the trial period, the pop-up software is activated. The software auto-starts and, according to the company, will continue to run until the user has paid the $29.95 fee. The interim agreement means that there will be no preliminary hearing in the case, which is set to resume in January 2008. Digital Enterprises will not have to admit to any wrongdoing over the duration of the agreement.

    Significance: The pay-up pop-ups don’t appear to be illegal on their face, as suggested by the fact that the interim agreement only reduces the frequency of the pop-ups and their ability to be covered by other browser windows. The FTC seems to be concerned that Digital Enterprises has gone too far in its attempts to get paid, by unreasonably interfering with a user’s ability to use his or her computer.