The operator of Tagged.com will pay $750,000 and overhaul its practices to resolve charges that the social networking site tricked members into providing personal details to lure new members and send out tens of millions of spam emails.
Tagged Inc will pay $500,000 under an agreement with New York Attorney General Andrew Cuomo, and $250,000 under a separate accord with Texas Attorney General Greg Abbott.
Cuomo said Tagged would also provide clear disclosures when seeking access to new users' email contacts, and would be unable to access those contacts or send messages on behalf of Tagged.com members without permission.
In July, Cuomo had threatened to sue the company, which has offices in San Francisco, for deceptive marketing practices and invasion of privacy.
"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 in a statement on Monday. "This agreement holds the company accountable for its invasion of privacy and puts the proper safeguards in place to keep it from happening again."
Tagged.com is the third-largest U.S. social networking site, according to its website. It said it had 16 million members active monthly, two-thirds of whom are outside the United States, and 7 billion page views a month.
Greg Tseng, Tagged's co-founder and chief executive, in a statement said the 5-year-old company had improved its registration and "invite your friends" processes, and would take further steps to increase member privacy.
"Despite differences of opinion about Tagged's intentions, we did acknowledge that the membership drive aggravated some customers," he said. Larger rivals include Facebook and News Corp's MySpace.
Cuomo accused Tagged.com of sending more than 60 million emails stating that friends had sent some photos, which in fact did not exist, and that recipients were told to sign up for Tagged.com to access them. The company would then use these contacts to send out more misleading emails, Cuomo said.
Tagged has said it stopped using the alleged misleading registration process before Cuomo's office first contacted it.
(Reporting by Jonathan Stempel; Editing by Lisa Von Ahn, Bernard Orr)
