Privacy & Information Security Law Blog

On October 22, 2014, the Federal Trade Commission announced that several interrelated online marketing and advertising companies (“Stipulating Defendants”) agreed to pay nearly $10 million to settle allegations that they engaged in a pattern of text message spamming, robocalling and mobile cramming practices in violation of Section 5 of the FTC Act, the Telemarketing and Consumer Fraud and Abuse Prevention Act, and the Telemarketing Sales Rule.

These settlements resolve an FTC complaint filed in the Southern District of Florida that alleged that the Stipulating Defendants sent consumers millions of unlawful text messages with offers for purportedly free merchandise and products, such as $1,000 gift cards and Apple iPads, as part of a scheme to, among other things, collect and sell the consumers’ personal information, cram unwanted charges on their mobile phone bills, and drive them to paid subscriptions for which the Stipulating Defendants received affiliate referral fees. According to the FTC, when consumers followed the hyperlinks in the text messages to redeem the gifts and prizes, they were asked to enter personal information such as their mobile phone number and payment card information, which the Stipulating Defendants sold to marketers or used to place robocalls or sign the consumers up for unwanted premium text messaging services.

In addition to paying $9.2 million in equitable damages, the settlements also contain various prohibitions on engaging in the unlawful and deceptive business practices alleged in the complaint, such as making any misrepresentation to consumers about a material fact regarding a product or service and engaging in mobile cramming practices.

The settlements became effective when Judge Robert N. Scola, Jr. of the U.S. District Court for the Southern District of Florida entered the stipulated final orders on October 16, 2014. The final orders mark the second FTC settlement related to mobile cramming this month, as earlier in October the FTC and several federal and state regulators reached a settlement with mobile phone carrier AT&T Mobility, LLC stemming from allegations related to mobile cramming.

View the settlements with the Stipulating Defendants: settlement one, settlement two and settlement three.