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An online advertiser that falsely claimed consumers had won free prizes has agreed to pay a $200,000 penalty to the Federal Trade Commission, which says the outfit failed to disclose that people had to spend money first.

Member Source Media, which operated under names such as ConsumerGain-dot-com, PremiumPerks-dot-com and FreeRetailRewards-dot-com, also agreed to disclosure the costs and obligations to qualify for any future incentives it may offer.

According to the FTC, the company and its principal, Chris Sommer, violated the federal CAN-SPAM act and other laws that bar deceptive advertisements. The company sent emails bearing subjects such as "Congratulations. You've won an iPod Video Player" and "Nascar Tickets Package Winner." Web-based ads contained statements such as "CONGRATULATIONS! You Have Been Chosen To Receive a FREE GATEWAY LAPTOP."

More savvy readers probably know where all of this is heading. End users hadn't "won" anything at all. To collect their winnings, consumers had to page through reams of other offers and then participate in other promotions that, among other things, required them to buy products, subscribe to a satellite television service and apply for multiple credit cards.

The settlement, which is still subject to court approval, also requires the company to open its financial records to regulators for monitoring. ®

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