## Facts

- The Federal Trade Commission (FTC) sued Pricewert LLC, an internet service provider (ISP) that also did business as “3FN” and “Triple Fiber Network.”
- The FTC alleged Pricewert was not a neutral conduit, but instead recruited and served customers engaged in illegal and harmful online conduct.
- The alleged conduct included hosting or supporting distribution of malware (including spyware and viruses), operation of botnets, phishing sites, and child pornography.
- The FTC also alleged Pricewert worked with botnet controllers (“botherders”) to deploy botnets consisting of thousands of infected computers.
- The FTC brought the case under § 5 of the FTC Act (unfair acts or practices) and sought relief under § 13(b), including a shutdown of the unlawful operation, permanent injunctive restrictions, and equitable monetary relief.
- Early in the case, the court granted temporary injunctive relief intended to stop ongoing harm, including measures that disconnected Pricewert’s systems from the internet.
- Pricewert did not answer or otherwise respond to the complaint.
- The FTC moved for default judgment, requesting a permanent injunction and disgorgement of Pricewert’s gains from the challenged conduct.

## Issues

1. Whether Pricewert’s alleged knowing recruitment, hosting, and participation in distributing illegal and harmful electronic content constituted an “unfair act or practice” under § 5 of the FTC Act.
2. Whether the FTC was entitled to permanent injunctive relief under § 13(b) based on the admitted allegations and the risk of continued misconduct.
3. Whether the court could order equitable monetary relief, including disgorgement, in connection with the default judgment.

## Decision

- The court granted the FTC’s motion for default judgment.
- Because Pricewert defaulted, the court treated the complaint’s well-pleaded factual allegations as admitted for purposes of liability.
- On those admitted facts, the court concluded Pricewert’s operation as an ISP that knowingly hosted and supported illegal and harmful online activity amounted to an unfair practice in or affecting commerce under § 5.
- The court entered a permanent injunction designed to stop Pricewert from continuing to operate in the manner alleged and to prevent similar misconduct going forward.
- The court also entered a monetary judgment awarding equitable relief in the form of disgorgement (with later proceedings addressing the amount and administration of monetary relief).

## Legal Principles

- On a motion for default judgment, a court may accept well-pleaded factual allegations as true for establishing liability, while still assessing whether the pleaded facts and requested relief justify judgment.
- Under § 5 of the FTC Act, an act or practice is “unfair” when it causes or is likely to cause substantial consumer injury that consumers cannot reasonably avoid and that is not outweighed by countervailing benefits to consumers or competition.
- An ISP’s knowing provision of hosting and connectivity to facilitate clearly unlawful and harmful online conduct—especially where the ISP recruits such customers or participates in distribution—can constitute an unfair practice under § 5.
- Under § 13(b), when the FTC shows a likelihood of continued violations, courts may enter permanent injunctive relief to prevent future unlawful practices.
- In FTC enforcement actions at the time of this decision, courts treated equitable remedies such as disgorgement as available ancillary relief to effectuate injunctive orders and prevent unjust enrichment.

## Conclusion

Federal Trade Commission v. Pricewert LLC upheld default judgment against an ISP alleged to have knowingly recruited, hosted, and participated in distributing harmful and illegal online content, holding those admitted allegations sufficient to establish an unfair practice under § 5 and supporting permanent injunctive relief and disgorgement.


Federal Trade Commission v. Pricewert LLC, 2010 WL 2105614 (2010)