April 28, 2005
ALBANY, N.Y. - New York Attorney General Eliot Spitzer sued a major Internet marketer Thursday, blaming it for secretly installing software that delivers nuisance pop-up advertisements and can slow and crash personal computers.
Shares of the company, Intermix Media Inc. of Los Angeles, fell $1.01, or 21 percent, to $3.79 in midday trading on the American Stock Exchange.
Spitzer accuses Intermix of redirecting computer users to Web sites where ads get displayed, adding unnecessary toolbars to Web browsers and delivering unwanted ads that pop up on computer screens.
A six-month investigation found that the company installed a wide range of advertising software on countless personal computers nationwide, with more than 3.7 million downloads directed at New Yorkers alone, Spitzer said.
"Spyware and adware are more than an annoyance," Spitzer said. "These fraudulent programs foul machines, undermine productivity and in many cases frustrate consumers' efforts to remove them from their computers. These issues can serve to be a hindrance to the growth of e-commerce."
Christopher Lipp, senior vice president and general counsel for Intermix, denied promoting or condoning spyware, saying its toolbars and redirect applications do not collect personal information on computer users.
He added that "many of the practices being challenged were instituted under prior leadership, and Intermix has been voluntarily and proactively improving these applications and related consumer disclosure and functionality for some time."
According to Spitzer, Intermix owns and operates such Web sites as mycoolscreen.com, cursorzone.com and flowgo.com, which advertised screensavers, games and other software available for download. Though those programs are free, they often carry other software for delivering ads and can interfere with normal computer use, he said.
One of the company's ad-delivery programs, "KeenValue," delivered pop-up ads while another program, "IncrediFind," redirected Web addresses to Intermix's own search engine, Spitzer said.
The ad software sometimes comes without notice, or if a user was asked permission, it was often through a vague reference in a lengthy licensing agreement that could be misleading or inaccurate, investigators said.
The programs sometimes omitted "un-install" applications and couldn't be removed by most computers' add/remove function, Spitzer said.
Spitzer's civil suit accuses Intermix of violating state General Business Law provisions against false advertising and deceptive business practices. He also accuses them of trespass under New York common law.
Spitzer, after taking on Wall Street and the insurance industry, is taking a harder look at Internet companies he believes are stunting the growth of e-commerce.
"We are looking across the industry at these practices because it really does go to the core of e-commerce," said Kenneth Dreifach, chief of Spitzer's Internet Bureau, "Increasingly, people don't feel in control."
The advertisers, which include Fortune 500 companies, aren't targeted.
Dreifach said negotiations with the company didn't result in a settlement, and more cases are possible.
"One of Internet users' biggest frustrations today is unwanted software that sneaks onto computers without their owner's consent and cannot be uninstalled," Ari Schwartz, the Associate Director Center for Democracy and Technology, "The practices alleged in this case are widespread on the Internet."