Former Intermix CEO Settles Spyware Case

The former chief executive officer of online marketing firm Intermix has agreed to give up profits allegedly made through the distribution of spyware as part of a settlement with the state of New York.

New York state Attorney General Eliot Spitzer said Brad Greenspan, the founder and former CEO of Intermix Media, will pay US$750,000 in penalties and returned profits. In exchange, Spitzer’s office plans to end its investigation.

Sending a Message

Intermix itself has already settled with New York state in a deal that has now been approved by a judge, Spitzer’s office said. In addition to paying $7.5 million over three years, Intermix accepted a ban on the distribution of adware programs in the future, a ban the firm said it had self-imposed before the settlement was agreed to.

“Internet marketing companies have gotten away with unethical and illegal software downloading practices for too long,” Spitzer said in a statement announcing the deal. “This agreement sends a message that intrusive and deceptive practices will not be tolerated.”

Greenspan was accused of directing employees of Intermix to bundle adware with other programs and to keep the disclosure of the bundling contained in a user agreement that was rarely clicked on by users.

Spitzer also announced today that New York Supreme Court Judge Judith Gische had approved a consent agreement between Intermix and Spitzer’s office requiring Intermix to pay $7.5 million in penalties and disgorgement, and accept a ban on the distribution of adware programs in the future. That agreement followed the lawsuit filed in April.

Moving On

A second firm, Acez Software, has also resolved an investigation into its bundling of Intermix adware with freeware screensaver programs. Acez agreed to pay $35,000 to end that inquiry.

Spitzer noted that federal lawmakers have been debating potential spyware legislation for some time, but that the Intermix investigations relied on existing state laws relating to misrepresentation.

At one point, it appeared the Intermix case could grow to include many more online companies, with Spitzer’s office saying it had other firms under investigation, leading to speculation that big-name Web companies could be implicated.

Search site Ask Jeeves, for instance, had a partnership with Intermix, and other major online sites had benefited from traffic referred to and from the Internet family of sites.

New Leaf

Intermix is likely eager to have the spyware matter put to rest so it can get back to its largely successful online marketing and affiliate programs. Intermix’ success at marketing online, especially to young people, helped convince News Corp. to purchase the firm for $580 million.

The Pew Internet & American Life Project recently issued a study saying that consumers had begun to change their online behaviors in order to avoid encountering spyware.

Pew Project Associate Director Susannah Fox said the fact that more than half of all U.S. Internet users had experienced some computer problems tied to spyware had prompted many to avoid sites they didn’t know and trust.

The implications are obvious, Fox said. “If people don’t feel comfortable, they will be less likely to visit new sites on the Internet and that could dampen growth of the Web and of e-commerce,” she said.

The data should provide ample motivation for online companies with good reputations to make sure that all of their many partners and affiliates are not engaged in spyware or even distributing adware or related programs that may be considered spyware by consumers.