Antitrust Lawyer Blog Commentary on Current Developments

Zango, Inc. Settles FTC Charges

On November 3, Zango, Inc., formerly known as 180solutions, Inc., one of the world’s largest distributors of adware, and two principals agreed to settle Federal Trade Commission charges that they used unfair and deceptive methods to download adware and obstruct consumers from removing it, in violation of federal law. The settlement bars future downloads of Zango’s adware without consumers’ consent, requires Zango to provide a way for consumers to remove the adware, and requires them to give up $3 million in ill-gotten gains.
According to the FTC, Zango often used third parties to install adware on consumers’ computers. The adware, including programs named Zango Search Assistant, 180Search Assistant, Seekmo, and n-CASE, monitors consumers’ Internet use in order to display targeted pop-up ads. It installed on U.S. consumers’ computers more than 70 million times and displayed more than 6.9 billion pop-up ads. The FTC alleges that Zango’s distributors – third-party affiliates who often contracted with numerous sub-affiliates – frequently offered consumers free content and software, such as screensavers, peer-to-peer file sharing software, games, and utilities, without disclosing that downloading them would result in installation of the adware. In other instances, Zango’s third-party distributors exploited security vulnerabilities in Web browsers to install the adware via “drive-by” downloads. As a result, millions of consumers received pop-up ads without knowing why, and had their Internet use monitored without their knowledge.

In addition, the agency alleges that Zango deliberately made it difficult to identify, locate, and remove the adware once it was installed. For example, Zango failed to label its pop-up ads to identify their origin, named its adware files with names resembling those of core systems software, provided uninstall tools that failed to uninstall the adware, gave confusing labels to those uninstall tools, and installed code on consumers’ computers that would enable the adware to be reinstalled secretly when consumers attempted to remove it.

The FTC charged that Zango’s failure to disclose that downloading the free content and software would result in installation of the adware was deceptive, and that its failure to provide consumers with a reasonable and effective means to identify, locate, and remove the adware from their computers was unfair, in violation of the FTC Act. The settlement bars Zango from using its adware to communicate with consumers’ computers – either by monitoring consumers’ Web surfing activities or delivering pop-up ads without verifying that consumers consented to installation of the adware. It bars Zango, directly or through others, from exploiting security vulnerabilities to download software, and requires that it give clear and prominent disclosures and obtain consumers’ express consent before downloading software onto consumers’ computers. It requires that Zango identify its ads and establish, implement, and maintain user-friendly mechanisms consumers can use to complain, stop its pop-ups, and uninstall its adware. It also requires that Zango monitor its third-party distributors to assure that its affiliates and their sub-affiliates comply with the FTC order. Finally, Zango will give up $3 million in ill-gotten gains to settle the charges. The settlement contains standard record keeping provisions to allow the FTC to monitor compliance.

Authored by

Camelia C. Mazard
202-589-1837
cmazard@dbmlawgroup.com