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FTC Demands Sony’s Full Disclosure About its DRM-CDs

Sony BMG Music Entertainment arrived at a settlement with the Federal Trade Commission on January 30, 2007 over the conflict of adding anti-piracy rootkit software on its DRM-laden CDs without informing the user.

According to the settlement, Sony BMG a combination of Sony Corp. and Germany's Bertelsmann AG must make further disclosures for the consumers and allow them to exchange the CDs, said the FTC. The settlement also requires Sony to reimburse consumers for any damage to their PCs.

Sony BMG's anti-piracy software restricted the devices to play music only by those which Sony Corp., Microsoft Corp., or other Windows compatible devices have designed. The software also limited the number of copies of the music to three that not only could pose security risks for the consumers but were also relatively hard to uninstall, the agency said.

The FTC chairman Deborah Platt Majoras said that installations of secret software that result in security risks are uninvited and illegal. Since the computers belong to their owners, companies must fully disclose the limitations inherent in their products' usage. This is important so consumers can make informed decisions as to whether they want to purchase and install the item.

The settlement occurred a month after Sony consented to pay $4.25 million to settle the lawsuits over the mentioned issues. The clamor over the XCP and MediaMax software Sony separately embedded on selected music titles came up in late 2005, when XCP software was found to be a rootkit that conceals files and running processes behind the Windows desktop.

Sony BMG had previously expressed the need to take extra precautions against music piracy. But many considered the controls highly restrictive. For example after ripping songs from the DRM-laden CDs onto PCs, it was not possible to load them onto iPods.

The FTC presented that Sony BMG acted deceptively by not disclosing adequately that the software installed on the consumers' computers would restrict copying and use of CDs on those PCs. The agency further argued that it was a breach of federal law to install software that would track items for marketing reasons without users' knowledge and approval.

Related article: FTC Reaches Million-Dollar Settlement For Spyware

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