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UPDATE:NY Attorney General: Tagged.com To Pay $500,000 Penalty

(Updates with statement from Tagged.com)

By Chad Bray

Of DOW JONES NEWSWIRES

NEW YORK -(Dow Jones)- Social-networking Web site Tagged.com has agreed to pay $500,000 in civil penalties and to make changes in how it sends out promotional e-mails after being accused of engaging in deceptive business practices, New York Attorney General Andrew Cuomo said Monday.

Cuomo had alleged the Web site misappropriated contact lists and the identities of it members in order to send out millions of deceptive and misleading emails to entice others to join the Web site.

"Unsuspecting users had no idea that Tagged had hijacked the e-mail addresses of their colleagues, families and friends for the purpose of blasting them with spam," Cuomo said.

Cuomo threatened to sue Tagged.com in June, alleging the Web site had sent more than 60 million misleading e-mails stating that Tagged.com members had posted private photos online for their friends to view when no photos existed. The company then told recipients of the e-mails they had to sign up to the Web site to view the photos, Cuomo said.

The invitations were constructed to appear as if they had been sent directly from members' personal e-mail accounts instead of from the company, Cuomo said.

As part of its settlement with the attorney general's office, Tagged.com will adopt a series of reforms, including providing clear and conspicuous disclosures when asking for access to a new user's e-mail contacts and no longer accessing those contacts or send messages on behalf of a Tagged.com member without that member's informed permission, Cuomo said.

Before sending out e-mail invitations, the company must also verify the e- mails with new members to make sure they do not inadvertently invite everyone on their contact lists, Cuomo said.

In a statement, Greg Tseng, Tagged.com's chief executive, said the company has resolved the dispute over its membership-recruitment drive earlier this year with the New York and the Texas attorneys general.

Tseng said the company argued in meetings with the attorneys general that its business practices are honorable and its simply uses the same business model as other social networking sites, namely "invite your friends."

"Despite differences of opinion about Tagged's intentions, we did acknowledge that the membership drive aggravated some customers," Tseng said. "We also agreed that Tagged had a responsibility to make sure people who interact with Tagged have a positive experience. To that end, in a meeting with Cuomo we voluntarily proposed substantial modifications to our processes and those were readily adopted and incorporated into the settlement. Since then, we have overhauled our registration and invite-your-friends processes, and will soon be adding more new features to increase member privacy."

-By Chad Bray, Dow Jones Newswires, 212-227-2017; chad.bray@dowjones.com

  (END) Dow Jones Newswires
  11-09-091040ET
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