Bonzi has not admitted liability but has agreed not to make any more false claims about the security or privacy attributes of the software.
According to the FTC, Bonzi Software and its principals, Joe and Jay Bonzi, marketed the InternetALERT product at a cost of $49 through their web site, promoted by banner, button and pop-up ads.
The ads claimed that if users did not have InternetALERT then hackers could "Steal your Credit Card & Personal Information; Read Your E-Mail; Plant a Virus or Worm; or Steal On-line Banking Information!"
The ads instructed consumers to "Download InternetALERT & Protect Yourself Now", and claimed that InternetALERT could provide consumers with the "comfort and security" of knowing that "no one from the internet" could access their computers without their knowledge or permission.
These claims, said the FTC, far exceeded the software's benefits. The FTC charged that the software did not significantly reduce the risk of unauthorised access into computers or the information stored in them, and provided only limited protection for computers against intrusions by hackers, viruses, worms, spyware, and other internet threats.
In addition, according to the complaint, the software lacked security features that provide virus protection to computers and prevent personal information stored on them from being sent to unauthorised parties.
The terms of the FTC settlement, known as a consent order, bar Bonzi from misrepresenting the extent to which its software can detect and reduce the risk of internet attacks, or can otherwise enhance security or privacy.
As part of the settlement, Bonzi has been ordered to notify current InternetALERT subscribers of the FTC's action and to allow them to cancel their service and receive a refund. In addition, Bonzi is required to send a copy of the order to third parties advertising or selling InternetALERT on its behalf and maintain records to assist the FTC in monitoring compliance.
The consent notice is not effective until 30 days have elapsed, in order to allow public comment, after which the FTC will make a final order. If Bonzi then violates the order, the firm will be liable for a civil penalty of up to $11,000 for each violation.
Bonzi has been in trouble with the FTC before. In February this year it settled charges brought by the watchdog for breaches of the Children's On-line Privacy Protection Act, better known as COPPA. The company was accused of knowingly collecting personal information from children on-line without first obtaining parental consent.