An online advertiser accused of misleading users by offering free items has settled with the US Federal Trade Commission (FTC).

The FTC had alleged that Adteractive Inc sent spam emails that lured users with promises of 'free' offers that turned out to be fronts for paid goods and services.

Recipients were promised free game consoles, notebook computers and TVs in the emails, but were required to navigate past a series of commercial offers and then purchase a number of third-party products.

The FTC said that users were required to sign up for car loans, apply for credit cards, subscribe to services and purchase other products to qualify for the gift.

Adteractive therefore violated the Can-Spam Act by not initially notifying users of the various requirements, according to the FTC.

The company agreed to pay a $650,000 fine to settle the case. Adteractive must also ensure that its advertisements adhere to the legislation and notify users up front of requirements for 'free gift' offers.

However, at least one member of the FTC was critical of the deal. Commissioner Jon Leibowitz referred to the settlement as a "downward departure" from previous cases and would "not be adequate to deter violations in the future ".

Law enforcement officials evoked the Can-Spam Act in October to send two porn spammers to prison for more than five years.

The legislation has also been a key weapon in EarthLink's ongoing legal offensive against spammers.