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(SAN DIEGO) – Attorney General Bill Lockyer today announced he and 22 other Attorneys General have settled a lawsuit against two providers of billing and collection services for adult web sites which requires the companies to maintain procedures designed to prevent children from accessing sites that contain sexually explicit material.
"More than anything else, this case was about protecting our children from exposure to pornography," said Lockyer. "The settlement achieves that objective and provides parents some peace of mind."
Lockyer will file the proposed settlement – which could provide consumers refunds and credits of up to $39 million – in San Diego County Superior Court as early as Friday. Before it becomes final, the settlement must be approved by Judge Kevin Enright. The settling defendants include: Alyon Technologies, Inc. of Secaucus, New Jersey; Alyon chief executive officer Stephane Touboul; and Telecollect, Inc. of Norcross, Georgia.
Aside from the provisions to prevent minors' exposure to pornography, the proposed settlement would require the defendants to drop claims to $17 million in unpaid consumer bills and credit up to $22 million to consumers who challenge their bills. About $4.3 million of the restitution could go to California consumers.
Lockyer's lawsuit, filed May 15, 2003, alleged the defendants violated state laws prohibiting unfair business practices, and false or deceptive advertising. Children could easily access adult web sites serviced by the defendants, according to the complaint. For example, no credit card number was required, and the system's operation rendered 900 number blocks ineffective, the complaint alleged. Despite the fact children accessed the sites without their parents' permission, the defendants billed the parents anyway, according to the complaint.
After Lockyer filed the lawsuit, the defendants in June 2003 implemented measures designed to prevent children's exposure to the sexually explicit web sites, as well as other unauthorized access. The proposed settlement would require the defendants to maintain these policies, and subject them to court-imposed sanctions if they do not. The most important of these procedures requires the defendants to ask for, and obtain, from customers easily verifiable identifying information unique to the adults who will be billed.
The complaint alleged the defendants charged customers $4.99 per minute for access to the adult web sites. Typical bills for California consumers ranged from less than $100 to more than $500.
The defendants failed to adequately disclose the terms and conditions governing access to the web sites, according to the complaint, and charged many consumers for services they did not use or authorize. In a common scenario cited in the complaint, consumers using the Internet would open pop-up windows or spam that automatically downloaded modem dialer software onto their computers. That software then could be used to dial up the Alyon billing gateway to access adult material.
Alyon captured the consumer's phone number, matched it with a name and address and then billed the consumers $4.99 per minute, allegedly without the consumer's knowledge or consent. For consumers who supposedly visited a site, Alyon tracked the connection and billed the line-subscriber of the telephone number used to gain the access.
Under the settlement, consumers billed for services used on or before June 15, 2003, who submitted a billing inquiry to the defendants before January 15, 2004, and who did not pay the bill, would not have to make those payments. These bills total an estimated $17 million dollars for consumers in the settling states. Californians are in line for $1.3 million in such debt forgiveness. Pursuant to the terms of a prior settlement with the Federal Trade Commission, the defendants claim they already have provided the credit to these consumers. Lockyer's proposed settlement, unlike other states', contains a provision that subjects the defendants to civil penalties if all eligible California consumers do not receive the required full credit.
Consumers billed for services used on or before June 15, 2003, who neither paid nor disputed the bills, would be given the opportunity to dispute them by completing an affidavit under penalty of perjury which they can download from www.alyon.com . By completing an affidavit, these consumers also could receive credit against their bills. The potential debt forgiveness for these consumers totals an estimated $22 million, including $3 million for California residents.
The defendants would have to provide notice of the affidavit process in the first bill they mail to eligible consumers following court approval of the settlement. The completed affidavits would have to be returned to the defendants within 45 days from the date the consumer receives the initial bill. If consumers did not meet that deadline, the defendants could continue to bill them.
Lockyer's proposed settlement also would require the defendants to provide full refunds to all California consumers who filed complaints with the Attorney General's Office on or before January 15, 2004 about charges incurred before June 15, 2003. Lockyer said Californians would receive a combined total of about $3,000 under this provision.
Additionally, the defendants would pay the states a combined $285,000, with California collecting about $15,000 of the total in civil penalties.