Marketers need to beware of adware
The New York attorney general recently announced separate settlements
with three major online advertisers for deceptively promoting
products and services online through adware, advertising that is
integrated into software and installed on a consumer's computer by a
third party, often without the consumer's knowledge or consent.
The settlements with Priceline, Travelocity and Cingular Wireless
mark the first time an attorney general has held advertisers
responsible for ads displayed through adware. They impose new
obligations on advertisers to independently confirm on an ongoing
basis that advertising is being delivered properly.
The three settlements grew out of the attorney general's
investigation of online publisher DirectRevenue. In an April 2006
lawsuit, the attorney general alleged that DirectRevenue installed
adware programs onto millions of computers that delivered a steady
stream of advertisements, monitored which Web sites were visited by
consumers, and collected data that the users submitted, without
adequate notice or consent.
The attorney general further alleged that the adware programs were
difficult to remove and consumers who had previously downloaded the
company's programs, known as "legacy users," continued to receive
Priceline, Travelocity and Cingular Wireless ads through those
programs. The attorney general claimed that Priceline, Travelocity
and Cingular, among others, spent hundreds of thousands of dollars
delivering its ads via DirectRevenue software.
The settlement agreements require that each advertiser deliver online
ads only through publishers that provide consumers the name of the
applicable adware program and any bundled software, brand each
advertisement, describe the adware and obtain consumer consent to
download and run it, make it practical for consumers to remove the
adware, obtain consent to continue serving ads to legacy users and
require the advertiser's affiliates to meet these same requirements.
Priceline, Travelocity and Cingular Wireless will pay $35,000,
$30,000 and $35,000, respectively, to the State of New York. On a
prospective basis, the advertisers are required to undertake
additional due diligence to confirm that their ads are being properly
These settlements highlight the need for all advertisers to take
their due diligence obligations one step further.
Prior to contracting with a company to deliver their ads, the
advertisers are required to investigate how ads will be delivered.
The companies must immediately cease using adware programs that
violate the settlement agreements or their own adware policies. The
advertisers are required to update their investigation of each ad
Even a broad indemnity agreement will not shield an advertiser from
liability if a regulator challenges the business practice of a third-