Sony CDs Busted by AG

Just more than a year after filing suit against recording giant Sony BMG, Texas Attorney General Greg Abbott on Dec. 19 announced his office has reached a settlement with the company to provide restitution to consumers who bought certain Sony CDs containing a cloaked spyware program. "Texans deserve to be protected from harmful, hidden files that threaten their privacy or the integrity of their computer systems," Abbott said in a press release.

In November 2005, Abbott filed the first-ever suit under Texas' newly enacted Consumer Protection Against Computer Spyware Act of 2005, alleging that in the course of trying to protect against copying of copyrighted music, Sony loaded cloaked files onto 52 of its CD music titles, leaving consumers vulnerable to hackers and identity thieves to whom the spyware offered easy access to consumers' personal information. A month later Abbott amended his suit, socking Sony with additional allegations that the company had violated the state's Deceptive Trade Practices Act – including that the company misrepresented that its "goods or services are of a particular standard, quality, or grade," when in fact they were not.

The precedent-setting settlement prohibits Sony BMG from selling any CDs containing so-called "content protection" software (such as the cloaked MediaMax or XCP programs) and requires the company to destroy any existing CDs embedded with these programs, to work with retailers to withdraw from the marketplace any remaining embedded CDs, and to submit to "independent, third-party monitoring of any software-enhanced music CDs for the next five years," according to an AG press release. In addition, consumers who unknowingly bought the CDs and had their computers and/or CD-ROM drives damaged by the discs may qualify for restitution. (Under the settlement, Sony will publish claim forms on its Web site, www.sonybmg.com.) Sony will also provide certain incentives – like free music downloads or gift cards – to consumers who agree to return the company spyware-enhanced CDs so that they can be destroyed.

"Our first-in-the-nation action against Sony BMG shows that consumer privacy will be vigorously protected," Abbott said. The settlement ensures that "harmful products" will be removed from the market "and sets best practices that we hope will lead to reforms across the industry," he said.

In other precedent-setting consumer-protection news, Abbott's office earlier this month announced a settlement with Internet-based digital-phone provider Vonage Holdings Corp., against whom the AG took action in March 2005, claiming that the company failed to adequately disclose the fact that its service did not include immediate access to traditional 911 emergency-number service. According to Abbott, Vonage (and other similar Voice-Over-Internet Protocol service providers) did not have access to the 911-database connection system, meaning that in an emergency, customers dialing 911 were routed to administrative numbers, typically in operation only during regular business hours – a circumstance that Vonage failed to clearly disclose to its customers, Abbott alleged.

On Dec. 14, Abbott announced a settlement with the company, which requires the digital-phone provider to "properly inform" subscribers about "critical differences" between 911 access via a traditional landline phone and its Internet-based phone service and about the need to register a physical address for the phone service since the VoIP service does not provide a caller's physical location to the emergency-responder network.

"During a moment of crisis, Texans expect to call 911 and receive emergency service," Abbott said in a press release. "Today's unprecedented agreement with Vonage ensures that millions of … customers in Texas and across the country are adequately informed about their Internet-based phone service."