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Internet company, FTC settle over access charges

By Peter Lewis
Seattle Times consumer-affairs reporter

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Alyon Technologies, a New Jersey-based Internet company, has agreed to forgive $17 million in consumer bills as part of a settlement with the Federal Trade Commission (FTC), the commission announced yesterday.

An additional $22 million in charges may be forgiven if consumers challenge the charges and qualify to have them removed.

It is not clear how many Washington residents may be among the more than 200,000 consumers expected to benefit from the settlement, but the Washington state Attorney General sued Alyon last year in state court after more than 100 consumers had complained.

Like the FTC, the state alleged Alyon was illegally charging consumers for accessing mostly adult-oriented Web sites at the rate of $4.99 a minute.

Both the state and the federal government contended Alyon used deceptive practices to fool consumers into downloading programs that dialed into Alyon's system to incur the charges.

Washington is one of 16 states that have filed lawsuits against Alyon.

Yesterday, Washington assistant state Attorney General Paula Selis declined comment on the status of negotiations but said she expected a settlement soon.

New York-based Alyon attorney Larry Fox said a proposed settlement calls for Alyon to pay $15,000 to Washington, with the money allocated for attorney fees, investigation costs and consumer-protection programs.

Fox noted that Alyon made no admissions of wrongdoing under its settlement with the FTC. He also contended that the case marks the first time the FTC has "apologized" to a defendant.

Alyon produced a letter dated Sept. 9, 2004, from FTC lawyer David Torok in which Torok apologized because an FTC employee mistakenly altered affidavits from consumers and presented them in federal court.
 
Yesterday, Torok said it was worth it to him to apologize to Alyon in exchange for getting almost $40 million in relief for more than 200,000 consumers.

The FTC settlement provides that consumers who were billed for adult services on or before June 15, 2003, and who disputed Alyon's charges on or before Jan. 15, 2004, will be credited.

In addition, consumers who were billed for services used on or before June 15, 2003, but who did not pay or dispute the charges will have the opportunity to dispute the charges.

Consumers' rights under the settlement are spelled out at: www.ftc.gov/os/2004/12/aloynexhf.pdf