By Bob Sullivan Technology correspondent
msnbc.com
updated 1/11/2005 12:11:21 PM ET 2005-01-11T17:11:21

The Federal Trade Commission announced its first pornography-related CAN-SPAM enforcement action on Tuesday, as a federal court ordered a Las Vegas-based operation to stop sending unwanted, sexually explicit e-mails to consumers.

The FTC claims the enterprise and its affiliates failed to include the mandatory warning label on its porn-related spam, in contradiction of the agency's Adult Labeling Rule.

A series of six organizations and individuals based in Las Vegas, the United Kingdom, and Latvia were also accused of not providing the required opt-out messages in their e-mails, and of making false claims, in violation of the FTC Act. The firms were all marketing the same set of adult Web sites through affiliate relationships, the FTC said.

The group of firms operates 10 to 20 adult-oriented Web sites, which are still functioning, the FTC said.  The lawsuit only covers marketing tactics used by firms which operate the sites.

The action specifically targeted so-called affiliate marketing practices, said Eileen Harrington, director of the FTC's Marketing Practices Division.  Companies that use unwanted e-mails to market their firms frequently distance themselves from the practice by sub-contracting the work, often many times over. But Harrington said the CAN-SPAM Act, which took force last January, makes all firms that engage in affiliate marketing liable for the actions of their sub-contractors.

"There's a message here for anybody running an affiliate program; you need to monitor what the third parties are doing," she said. "If you are using a business model that recruits others, you are strictly liable for the practices of those third parties. It's not just the people who push the button. It's the business that provides the financial incentive. The law is clear and strict."

A federal district court has issued a temporary restraining order against the defendants, barring them from sending more spam and freezing their assets, pending a preliminary hearing.

The FTC said this was its sixth CAN-SPAM lawsuit, but the first involving pornography.

According to the FTC, the defendants spammed hundreds of thousands of consumers with sexually-explicit or sexually-suggestive e-mails. The FTC alleges that the defendants did not include the required “SEXUALLY-EXPLICIT:” warning in the subject line of the e-mails, or failed to exclude the sexually oriented material from the "initially-viewable" content of the messages.

Defendants in the complaint include: Global Net Solutions, based in Las Vegas, Nevada; Global Net Ventures, Ltd., based in London, England; Wedlake, Ltd, allegedly based in Riga, Latvia; Open Space Enterprises, Inc., based in Las Vegas; Southlake Group, Inc., based in Las Vegas; WTFRC, Inc., doing business as Reflected Networks, Inc., based in Las Vegas; Dustin Hamilton; Tobin Banks; Gregory Hamilton; Philip Doroff; and Paul Rose.

"(CAN-SPAM) gives consumers a tool to control what comes into their inboxes,” said Lydia Parnes, Acting Director of the FTC’s Bureau of Consumer Protection. “Spammers beware. We are on the side of parents and kids to protect their ability to filter out sexually-explicit e-mails.”

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