There’s no such thing as a free plasma TV.
ValueClick Inc., one of the largest Web advertising networks, will have to pay federal authorities $2.9 million for telling consumers otherwise.
The civil settlement Monday with the Federal Trade Commission is the largest penalty to date under the 2003 Can-Spam Act, which forbids deceptive e-mails and unsolicited commercial come-ons that aren’t clearly labeled.
The case is embarrassing for publicly traded ValueClick of Westlake Village, which has been touted as a likely takeover candidate in the wake of major online advertising acquisitions by Google Inc., Microsoft Corp. and others. Analysts have said the FTC probe would have to be resolved before the company could be acquired.
ValueClick shares dropped more than 7% on Monday, falling $1.27 to $16.20, the lowest level in more than a year.
“Online marketing is a nasty business,” said Harvard Business School professor Ben Edelman. “The easiest way to make money through online ads is by scamming your customers.”
The FTC, which sued the company in Los Angeles, also accused ValueClick and its subsidiaries Hi-Speed Media and E-Babylon of falsely assuring customers that their personal financial data were secure. In fact, the agency said, some credit card numbers and three-digit verification codes weren’t encrypted at all. In addition, the databases where that information was stored were inadequately protected and could have been penetrated with a well-known attack technique.
Joel Winston, associate director of the FTC’s privacy division, said there was no evidence of a break-in.
Edelman and other researchers and merchants have criticized ValueClick in the past for placing ads through affiliates that used security holes in consumer computers to install ad-spewing software.
This time, the FTC said, the problems were in pop-up ads, banner ads and e-mails that touted free laptops, TVs and Sony PlayStation consoles.
Consumers who followed up were led to sites that deluged them with offers of other merchandise, forcing them to wade through more than 40 screens of material. After that, the FTC complaint said, they were obliged to make a number of purchases or take other actions before they could claim their prizes.
“In most cases, it is impossible for the consumer to qualify for the . . . defendants’ promised free merchandise without spending money,” the FTC suit said. ValueClick officials didn’t return phone calls seeking comment.
Last month, in announcing that it anticipated a settlement, the company said that it hadn’t admitted wrongdoing and that the dispute involved “past practices.”