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FTC settles domain name suit

Under a deal reached with federal regulators, five defendants accused of selling bogus Web domains agree not to mislead customers and to put up $300,000 toward refunds worldwide.

The Federal Trade Commission said Tuesday it reached a settlement with five parties accused of selling bogus Web site domains.

TLD Network Ltd, TLD Networks, Quantum Management Ltd, TBS Industries Ltd and Thomas Goolnik advertised and sold domains that did not work, alleged federal regulators.

Beginning in July last year, the defendants offered such domains as .usa, .sex, .brit and .scot, charging customers $59 annually to register the names. But they were not accredited domain name registrars, the FTC charged. As a result, the domain names did not work.

Federal regulators filed a false-advertising lawsuit against the five parties in U.S. district court back in March, seeking to permanently bar them from selling the domains, said Steven Wernikoff, an FTC attorney. TLD Network, Quantum Management and TBS Industries are all U.K.-based companies, while TLD Networks and individual Thomas Goolnik are based in the United States.

Under the settlement, the defendants cannot misrepresent the usability of domain names, nor sell their customer lists. The FTC regulators also required them to disclose the limitations or conditions of using their domain names and to provide $300,000 toward redress for consumers worldwide.

The defendants raised $1 million in registration fees during their nine months of operation, regulators alleged. Sales jumped following Sept. 11, when the defendants appealed to prospective customers' patriotism by spamming them with offers to sign up for .usa domains, Wernikoff said.