May 20, 2004, 12:00 AM

Overstock.com sues SmartBargains.com over “spyware” complaints

Overstock becomes the second online retailer in a week to announce a suit against another retailer over the issue of so-called “spyware.” The complaint is the first to invoke Utah’s new Spyware Control Act.

Kurt Peters

Executive Editor

Overstock.com Inc. became the second online retailer in a week to announce a suit against another retailer over the issue of so-called “spyware.” Invoking Utah’s recently enacted Spyware Control Act-the first Utah retailer to do so-Overstock has filed a complaint against SmartBargains.com Inc. in the Third District Court in Salt Lake City.

On Monday, L.L. Bean filed a similar complaint against online marketers Nordstrom Inc. and JC Penney Co. Inc., Atkins Nutritionals Inc. and Gevalia Coffee over their alleged use of spyware on LLBean.com. That suit, filed in Maine District Court, claims the pop-up ads infringe on L.L. Bean’s trademark rights. Claria Corp., formerly known as Gator, developed the software at issue in the complaint.

Spyware is often bundled in when web users voluntarily download an application they want, such as the ability to share files, to their browser. Many web users are unaware they’ve also downloaded the additional application. The software reads the user’s activity on web sites he or she visits, and it can trigger pop-up ads for competing products and companies depending on what it sees the user is searching or browsing for on the visited site.

Overstock has stated it believes using spyware to deliver pop-up ads over other companies’ web sites “constitutes predatory advertising, unfair competition, and is a nuisance for consumers.” CEO Patrick Byrne likens pop-up ads to spam, saying Overstock doesn’t place advertising with firms that use spyware and has asked its affiliates to avoid the software.

SmartBargains is in the process of reviewing the complaint, but in a written statement, CEO Carl Rosendorf questions Overstock’s motive in filing, saying it was SmartBargains’ belief that Overstock`s intention is to avoid competition. Overstock and SmartBargains are competitors, with both sites geared toward bargain-hunters.

“The Gator Advertising and Information Network that is utilized by SmartBargains is a program that consumers download in order to comparison shop on a real-time basis. Several federal court decisions, in fact, have strongly supported the consumer’s right to access this form of advertising. We believe Overstock.com’s intention is to avoid and restrict competition by impeding consumers from comparison shopping on the Internet, one of the major factors contributing to the growth of online retailing,” Rosendorf said in the statement.

 

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