Pop-Up Firm Challenges FTC Complaint

A San Diego company accused by the Federal Trade Commission of operating an extortion scheme through its pop-up ads is fighting back in court.

The FTC said the company, D Squared Solutions, and its executives, Anish Dhingra and Jeffrey Davis, took advantage of a flaw in Microsoft's Windows operating system to bombard users with pop-ups advertising software to make the ads stop. U.S. District Court in Baltimore granted the FTC's request for a temporary restraining order Oct. 30 forbidding D Squared from sending such Windows ads.

Instead of consenting to the order, lawyers for Dhingra and Davis answered the complaint in District Court last week and accused the FTC of bullying a small software startup offering a valuable service to consumers. They want the court to overturn the restraining order.

“The FTC abuses its substantial government resources trying to stop a small business from alerting consumers to a security flaw lurking hidden in their personal computers,” the defendants claim in a motion. “The FTC should not be allowed to fulfill its peculiar, and misguided, desire to legislate commercial activity by fiat.”

The defendants admit D Squared software displays pop-up ads via the Windows Messenger Service, a communications system meant to let network administrators communicate instant information, but deny any wrongdoing. They say their software performs a public service by advising consumers of flaws that could be exploited to deliberately crash their systems or take them over remotely.

“At most, the method D Squared uses to alert them of this threat is annoying,” the motion states.

In a response filed Dec. 8, the FTC stated that D Squared misrepresents its business when it really creates a problem and then offers to solve it — for a fee.

“The defendants' marketing techniques cannot be reconciled with their claims of consumer protection,” the FTC claims.

The FTC complaint charges D Squared with two counts. One is an extortion charge for sending messages that offer a product to stop the messages. The other count is for improperly using Windows Messenger Service to interfere with consumers' use of their computers by placing the pop-up ads near the center of their screens and sending them as frequently as every 10 minutes.

The FTC claims D Squared operated at least 30 Web sites offering software that stops pop-up messages for $25 to $30. The FTC also accuses D Squared of selling its software that exploits Windows Messenger Service to other marketers.

Lawyers for Dhingra and Davis say the ads are “no more harmful than roadway speed-bumps or television commercials.” To buttress their claim, the defendants note that the FTC reports receiving 209 complaints, “infinitesimal” compared with the billions of pop-up ads D Squared allegedly served.

Microsoft alerted customers to the vulnerability in Windows Messenger Service last month, urging home computer users to turn off the function. Future Windows editions will have the service turned off as its default setting. FTC officials have urged computer users to install firewalls to protect against such intrusions.

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