FTC Sues 3 Web Site Providers For Illegal Billing of Small Firms

The Federal Trade Commission, as part of a new crackdown onInternet business fraud, said yesterday it has sued three World WideWeb site providers for illegally "cramming" charges for theirservices onto the phone bills of unsuspecting small-business owners.

More than 300,000 small businesses nationwide were targeted by theInternet telemarketing companies, the FTC said, with an unknownnumber of those firms becoming victims of illegal charges that oftenwent undetected.

The FTC's focus on Internet-based businesses is a broadening ofpast efforts to stamp out "cramming" of long-distance telephonecharges. The agency said Internet fraud usually begins with a phonecall to a business offering a "free trial period" or a "noobligation" chance to have a Web site created for the company. Butsome businesses that declined the offer or tried to cancel theagreement still had charges placed on their phone bills, the agencyalleged, sometimes for months in a row."These operators often targeted businesses with less than 10employees," said Jodie Bernstein, director of the FTC's bureau ofconsumer protection. "There was less likelihood they will haverigorous accounting procedures."Among the victims of the scam was Curtis Campbell of CampbellCommercial Real Estate in Baltimore, who noticed a mysterious $29charge for "Web site design" on his company's phone bill last July.After hours on the phone talking to dozens of people, Curtis couldnot get the charge removed, so he contacted his local public servicecommission.As other businesses did the same, the FTC jumped in to investigateand found that the practice was widespread and costing smallbusinesses millions of dollars, Bernstein said.The FTC has filed suit against Wazzu Corp. of Fountain Valley,Calif; Shared Network Services of Lodi, Calif.; and WebViper ofMontgomery, Ala. The agency said it is negotiating settlements withall three and hopes that part of that settlement will be repaying thesmall businesses that were illegally charged for Web page services.Executives at two of the three companies denied yesterday thatthey purposely deceived customers or attempted to hide charges.Kirk Waldfogel, chief operating officer of Wazzu, said in astatement that the company is "honest" in the way it markets itsservices and has a system to ferret out inappropriate sales tacticsby its marketers.Likewise, Shared Network President Peter Westbrook said there wasa period of time last year when the company was growing fast andwrongly charged some consumers. "There's just absolutely no basis toany cramming charges at all," he said. "We've taken care of ourproblems."WebViper executive Patrick Taylor said a telemarketing firm hiredby the company made some unauthorized charges to customers. But hesaid WebViper fired that firm in March and has had no such problemssince then.The FTC stressed yesterday that even though it has taken actionagainst the three companies, it is pursuing leads about other Webservice providers that engage in similar cramming practices.As part of that effort, the FTC said it is working with the SmallBusiness Administration on an education campaign to alert businessowners to be wary of hard-sell telemarketing calls.