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FTC v. Verity International

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Citation Edit

Federal Trade Comm’n v. Verity Int’l Ltd., 335 F. Supp. 2d 479 (S.D.N.Y. 2004) (full-text), aff’d in part, rev’d in part, 443 F.3d 48 (2d Cir. 2006) (full-text), cert. denied, 549 U.S. 1278 (2007).

Factual Background Edit

The Federal Trade Commission alleged that the defendants orchestrated a scheme whereby consumers seeking online entertainment were disconnected from their regular ISPs and reconnected to a Madagascar phone number. The consumers were then charged between $3.99 and $7.78 per minute for the duration of each connection. In that case, AT&T and Sprint — which were not parties to the FTC enforcement action — had carried the calls connecting the consumers’ computers to the defendants’ servers. Consumers were billed at AT&T’s and Sprint’s filed rates for calls to Madagascar.

Court Proceedings Edit

The defendants therefore argued that the entertainment service in question was provided on a common carrier basis and thus outside the FTC’s jurisdiction. One defendant also claimed to be a common carrier itself and hence beyond FTC jurisdiction. Both the District Court and the Court of Appeals rejected those arguments.

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