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Company must refund customers overcharged for online adult content

| Friday, May 16, 2003

A New Jersey-based billing company for "adult" Web sites will have to refund customers who may have been overcharged.

Attorney General Mike Fisher's Bureau of Consumer Protection filed an "Assurance of Voluntary Compliance" agreement with Alyon Technologies Inc., Secaucus, N.J., to resolve accusations of deceptive practices that resulted in nearly 70 complaints from consumers throughout 28 Pennsylvania counties.

The 70 consumers are expected to receive a total of $14,000 in restitution. Consumers must document that they were erroneously or unknowingly billed to access these sites during 2002 and 2003 to receive the refunds.

Consumers seeking full refunds should contact the Bureau of Consumer Protection prior to Aug. 13 by calling 800-441-2555 or filing a complaint online at www.attorneygeneral.gov.

Fisher also said Alyon must make dramatic changes in its verification process to ensure billing accuracy in the future and require the Web sites it serves to post in bold notices information regarding access, authorization and rates for services.

"The company is accused of billing many consumers $4.99 per minute to visit these 'adult' Web sites even though some never accessed the Videotext material or even own a computer," Fisher said. "In other instances, Alyon allegedly failed to conspicuously disclose the terms and fees for the services, or verify the party that agreed to accept the billing."

According to investigators, Alyon Technologies contracted with Electronic Group Interactive in January 2002 to set up 900 number lines and 201 area code numbers to enable Internet users to gain access to "adult" Web sites. EGI has agreements with numerous Web site hosts that generate what is referred to as "adult entertainment" Videotext material. The sites have been promoted to Internet users through "spam" e-mails or "pop-up" ads that appear on the consumers computer screens.

Alyon tracked calls to these lines to perform the billing for the Videotext services. Alyon also arranged to handle the collection of unpaid bills.

Investigators said to access the Videotext services without the knowledge of many consumers, an automatic dialer program was downloaded to their computer that would disconnect their modem from their Internet services provider, and then reconnect them to the Internet through one of the Alyon numbers. Consumers then were billed directly by Alyon for the Videotext services and by their telephone carriers for the long-distance fees incurred.

The commonwealth said that the only notice consumers received prior to downloading the dialer program was a box showing only a few lines of text at any one time. If printed in its entirety, the text was four or more pages long. At the end of the text consumers were asked if they "agree" or "disagree" with the terms.

"We contend that this format to display the terms was clearly not designed to ensure that consumers understood that they were entering into a contract or agreement," Fisher said. "Even worse, those who did check off the 'I disagree' box claimed that they were still billed for these services."

Fisher said his office received complaints from consumers who said they were billed by Alyon for Videotext services that they never accessed or that bills they received involved calls from a telephone number that was not assigned to them at the time the calls were made. Other consumers said Alyon failed to verify whether the parties accessing the sites, including minors, had authority to enter into a binding contract.

Under the terms of the assurance, Alyon is required to:

= Pay restitution to consumers who already filed complaints with Fisher's office, plus refund those who file complaints before Aug. 13 with documentation that they were wrongfully billed.

= Implement by May 23 the use of pre-subscription agreements or other verification systems that will confirm the party who is authorizing payment for Videotext services.

= Create a system that disconnects the Internet user who after three attempts fails to enter the correct identifying information.

= Prominently and conspicuously disclose all terms, conditions, fees and billing practices in a clear and concise manner.

= Include as a condition of its contract with Videotext service providers, a prohibition against advertising or distributing dialer programs through "spam" e-mails and "pop-up" ads on game Web sites predominantly visited by minors.

= Verify that the party accessing the services is authorized to be billed before incurring any charges.

Fisher said Alyon also is required to pay $10,000 in civil penalties and $5,000 for the commonwealth's investigation costs.

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