Elite IT Partners: Web Forms, Outbound Calls, and Tech Support Under the TSR

The Case

The FTC filed its complaint on February 25, 2019, in the U.S. District Court for the District of Utah (Case No. 2:19-cv-00125-RJS) against Elite IT Partners, Inc. d/b/a Elite IT Home and its president James Michael Martinos. The court issued a temporary restraining order, and the FTC announced the action in March 2019 as part of a federal, state, and international crackdown on tech support scams focused on older adults.

How Consumers Were Reached

According to the FTC complaint, since at least 2014 the defendants ran a tech support scheme that relied on outbound calls prompted by internet searches. Internet ads targeted consumers looking for help recovering their email passwords. On the defendants' webpage, consumers were invited to "SPEAK TO A LIVE AGENT" by entering their name, email address, and phone number. The defendants then called them.

The complaint alleged that the vast majority of consumers contacted were elderly or unfamiliar with computers. Telemarketers often claimed to be associated with companies like Microsoft and Yahoo!, obtained remote access, ran bogus diagnostic tests, and claimed the computers were infected.

The Undisclosed Terms

The complaint alleged that the defendants did not disclose orally, before obtaining consent to payment, that the service plans required a one-year commitment, renewed automatically for a second year unless cancelled in writing at least 30 days before the end of the term, and carried a $150 early cancellation fee. Upgrades restarted the one-year commitment.

The Counts

1. Deceptive representations about viruses and infections (FTC Act)
2. Deceptive representations about affiliations (FTC Act)
3. False or misleading statements to induce payment, in violation of the TSR
4. Failure to clearly and conspicuously disclose material terms, including total cost and refund policy, in violation of the TSR
5. Illegal negative option marketing in online transactions, under the Restore Online Shoppers' Confidence Act (ROSCA)

The complaint stated that the TSR's ban on false or misleading statements applies to upsells whether made during an outbound call or an inbound call.

The Outcome

The court approved a stipulated order on December 9, 2019. It imposed a $13.5 million judgment, suspended upon Martinos's payment of $173,500 and the turnover of other assets. Martinos and Elite IT were permanently banned from offering or marketing tech support products or services to consumers, and prohibited from misrepresenting cancellation or refund policies, claiming false affiliations, or claiming that a consumer's product is infected with a virus. In October 2021, the FTC announced it was sending 31,075 checks totaling nearly $300,000 to affected consumers.

The bottom line: A web form that leads to a sales call does not turn the call into an exempt inbound call. When the business places the call, the TSR's outbound requirements apply, and material terms must be disclosed before payment.