ONLINE sex products retailer adultshop.com has launched multi-million dollar legal action against the vendors of Today's Success - an online pornography company it bought three years ago.

Adultshop lodged a statement of claim in the West Australian Supreme Court yesterday containing several allegations of deceptive and misleading conduct against the former owners of Today's Success, Dean Shannon and Steve Jones.

Adultshop alleges the pair breached the Trade Practices Act during the sale and subsequent operation of the company. Further, Adultshop claims the pair breached their fiduciary duties and contractual obligations.

In June 2001, Adultshop bought Today's Success for $12 million - $1 million in cash and $11 million in shares.

In March 2002, Adultshop announced bullish profit forecasts, which it says were based on financial projections that included expected revenues from Today's Success.

However, the business suffered major problems with its credit card processing operations. Adultshop says this led to major profit downgrades, announced to the stockmarket in September 2002.

The company wrote off the investment in Today's Success in December 2002.

As a result of the various announcements, Adultshop's shares rose and plunged. Adultshop's announcements and share trading were investigated in 2002 by the Australian Securities & Investments commission.

ASIC also examined the business dealings between Adultshop chief executive Malcolm Day and his girlfriend, former Penthouse Pet Bree Maddox.

Ms Maddox's company B-Mad Online made $1.6 million from Adultshop for directing internet traffic to pornographic websites within the Today's Success stable.

ASIC made no adverse finding against Adultshop.

Adultshop says the litigation could last for years and it is confident it has enough money to fund it.

At the last financial report the company had about $15 million in cash.

The Australian was unable to contact either of the former owners of Today's Success yesterday.