- The Washington Times - Thursday, March 23, 2006

New York Attorney General Eliot Spitzer said yesterday he sued a D.C. Internet company for selling to e-mail marketers millions of personal consumer records obtained via “a strict promise of confidentiality.”

Gratis Internet operates Web sites, including FreeiPods.com and FreeCondoms.com, that provide consumers with ways to receive those products at no cost. The company earns about $50 each time a visitor signs up for the sometimes free trial offers from advertisers, including Citibank and Blockbuster Inc., as long as those users get other people to sign up for the service.

From 2000 through 2004, Gratis Internet’s sites included privacy promises that it would never “give out, sell or lend your name or information to anyone.” But Mr. Spitzer’s suit says company owners Peter Martin and Robert Jewell repeatedly violated those promises during the past two years by selling access to as many as 7 million confidential user records to three e-mail marketers.

The marketers sent hundreds of millions of e-mail solicitations to those users, on behalf of their own customers, according to the lawsuit.

A Gratis Internet spokesman said yesterday the claim of 7 million customer records was overstated because it includes fake and mistyped e-mail, duplicates and fraud.

“Allegations made by the New York State Office of the Attorney General that Gratis Internet ‘sold’ e-mail addresses to Datran Media or other companies, and/or that these companies ‘purchased’ personal user information from Gratis Internet are completely untrue,” according to a company statement.

The three e-mail marketers acted on Gratis Internet’s behalf “to send promotional e-mails to its own users, and at no time ever engaged in a sale or purchase of data,” according to the statement. The company called it a “standard and totally lawful practice” analogous to a retailer hiring a vendor to do a direct-mail campaign.

“At all times, Gratis has maintained control and ownership of its user information and never, not once, profited from any sale of data,” according to the company.

Privacy advocates praised Mr. Spitzer’s suit, which seeks $500 in damages for each instance in which a New York user’s information was shared with an outside entity or wrongfully delivered into the state.

The Gratis Internet spokesman did not say how many D.C.-area users it has, but that its customer demographics aligned with U.S. population rates.

The company was 18th on Inc. magazine’s list of the 500 fastest-growing private companies last year. Gratis Internet achieved three-year growth of more than 2,349 percent; about $20.5 million in revenue in 2004; and had 12 employees, according to the Inc. profile.

An online report on Gratis Internet from the local D.C.-area Better Business Bureau was being updated yesterday. But an archived report dated March 13 included 365 complaints in the past three years, 240 in the past 12 months.

About half of the BBB complaints — 157 — were for “service issues,” and 144 of them had been resolved, as had most of the other complaints filed against the company.

Yesterday’s announcement follows a settlement earlier this month between Mr. Spitzer’s office and e-mail marketer Datran Media LLC, one of the three companies to which Mr. Spitzer said Gratis Internet purportedly sold its user records.

That investigation found that New York company Datran knew of Gratis Internet’s privacy promise to consumers when it bought the 7 million consumer files, but then sent millions of unsolicited e-mails to the listed consumers.

Datran agreed to a $1.1 million settlement.

E-mail marketing accounted for less than 1.5 percent of Gratis Internet’s 2004 and 2005 revenue, and it earned less than $32,000 from New York users from its practice of sending promotional e-mail, the company said.

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