The U.S. Federal Trade Commission on Monday filed documents in federal district court apologizing for an error the commission made in communicating to consumers the court's rulings in the FTC's ongoing lawsuit against payment processor Alyon Technologies Inc.. The commission also promised to do what it could to mitigate any potential damage the miscommunication might have caused.
"An FTC employee, while handling consumer complaints about Alyon's billing practices, altered one of the affidavit forms prescribed by the Court (the No-Call Affidavit, Attachment D to the Cort's July 10, 2003 Order), and distributed such altered affidavits to a number of consumers," the filing states. "This altered affidavit inserted language into the explanation field that the employee paraphrased from the Court's July 10 Order and an FTC News Release.... Undersigned counsel apologizes to the court that these altered affidavits were sent to consumers, and promises to make every effort to ensure that such a regrettable lapse does not happen again."
The language at issue involves phraseology Alyon has disputed vehemently since last July, when a widely distributed FTC press release indicated erroneously that the United States District Court for the Northern District of Georgia, Atlanta Division, had prohibited Alyon from "billing, collecting, or attempting to collect payment" for services the company rendered via its association with Electronic Group Interactive S.L. and other providers of online erotic content.
Monday's filing is exactly the kind of response for which Alyon and its attorneys have been pressuring the FTC since last summer. Although the official apology is directed to the court and not to Alyon and is dated more than six months after the error was made, Alyon chief executive Stephane Touboul said he feels good about the development, which he is sure resulted from recent conversations between Alyon's attorneys and upper-level staff at the FTC.
"Our attorneys went to the higher-ups at the commission and pointed out to them how the commission was behaving lawlessly," he said. "They said the staff would be reprimanded and required to apologize."
Touboul also said he thinks the FTC didn't have much choice but to admit the mistake officially and try to rectify the situation. "This [type of behavior] is contempt of court," he noted. "If you were not the government, you'd go to jail [for misrepresenting a court ruling]."
In order to rectify the situation, the FTC promised to take several steps. "First, we are sending letters of correction to every one of the consumers contacted by the FTC employee, whether or not this employee sent them an altered affidavit," Monday's filing states. "In addition, we are sending all consumers with whom the employee spoke a copy of the Court's July 10, 2003, Order and a copy of the Court's October 17, 2003, Order. Second, we have clarified the FTC News Release in case any consumers might have misunderstood it....">p>Touboul said the FTC's unusual move may indicate that the commission is beginning to consider a settlement with his company instead of continuing litigation. He and Alyon's attorneys met with a settlement attorney employed by the commission recently, he said, but no agreement has been reached. "If they'll do what we want [which is to adopt the operating terms already approved by the court], then we'll settle," Touboul said.
The FTC filed suit against Alyon, Touboul, and TelCollect [a subcontracting collection and customer service agency] in May 2003, charging the group with engaging in "unfair and deceptive trade practices" in violation of at least four federal statutes. Among other things, the suit sought an injunction prohibiting Alyon's continued operation as a gateway billing services provider for adult Websites, a freeze on the company's assets, and the insertion of a receiver to manage restitution to consumers.
In his decision dated July 10, U.S. District Judge Richard W. Story declined to grant the FTC's request. Story issued a subsequent clarification ruling on Oct. 17 after widespread media coverage of an FTC press release misstating the court's decision.
