updated 8/3/2005 3:27:16 PM ET 2005-08-03T19:27:16

Advertising.com Inc., a unit of Time Warner Inc.'s America Online, agreed to settle federal charges that the company offered free security software without adequately disclosing that it also came with adware.

Under a settlement with the Federal Trade Commission, Advertising.com will be required to "clearly and prominently" disclose that consumers who install the program, SpyBlast, will receive pop-up ads based on their Internet browsing habits.

The settlement also requires that Advertising.com comply with standard record-keeping and other provisions to allow the FTC to monitor compliance with the order. The proposed consent order doesn't cover America Online, which bought Advertising.com for $435 million in 2004.

The FTC complaint charged that when consumers install SpyBlast — a software intended to protect against hackers — they are not required to read the agreement alerting users about receiving potential marketing messages.

Adware and spyware have become major nuisances for consumers. Both types of programs typically are installed with little or no disclosure. While adware is less dangerous than spyware, consumers complain adware programs bombard them with pop-up ads, slow their computers and are hard to remove.

In June, Intermix Media Inc. agreed to pay $7.5 million to settle charges filed by New York Attorney General Eliot Spitzer that it illegally distributed adware.

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