On April 22, 2009, the FTC issued a staff report on the current state of the mobile commerce (“M-commerce”) market. The report, which resulted from a series of public town hall sessions hosted by the FTC, praised participants in the mobile marketplace for their innovation and the industry’s growth in recent years.

The FTC, however, cautioned that at least three areas would require close observation in the future: (1) cost disclosures for mobile services, (2) unwanted or harmful mobile text messages, and (3) privacy challenges related to children’s use of smartphones to access the mobile web. The FTC concluded the report by announcing a plan to expedite by five years, to 2010, its review of its Children’s Online Privacy Protection Rule.

The report observed a series of positive developments in the field of M-commerce. The U.S. mobile marketplace currently has a subscriber penetration rate of 80 percent of the population. Text messaging increased by 40 percent between 2006 and 2007 and sales of musical ringtones and ringbacks were projected to reach $700 million in 2008.

Additionally, although U.S. wireless subscribers use their devices for phone services more frequently than to access the Internet, searches related to sports, weather, restaurants, movies, and traffic have shown a marked increase.

Almost unanimously, M-commerce experts cited in the report predicted continued growth in the use of mobile services as bandwidth and Internet access speed increases, prices drop, and consumers increasingly adapt to using non-voice services on their smartphones.  

At the same time, the FTC noted that it would watch certain industry developments closely to determine if regulation would be necessary in the future. For example, the report expressed concern about whether existing privacy laws and regulations sufficiently protect consumers, particularly with respect to the locationenhanced services available on most smartphones.

While most of these services require consumer notice and consent, the report noted that obtaining consent is a challenging process given the broad range of services at issue and the corresponding methods of notice and consent.

The report also identified industry-wide problems in the areas of consumer billing, disclosures, complaint handling, and dispute resolution. Consumers frequently describe these procedures as opaque despite the existence of industry best practices. The FTC noted that industry guidelines should be better publicized and reviewed frequently to ensure consumer protection.

Additionally, the FTC promised to continue to partner with law enforcement officials to track the effect on consumers of unwanted mobile text messages, malware, and spyware. Many consumers disregard warnings about mitigating security risks, while the number of viruses, spammers, and data thieves increase. The report mentioned methods of allowing consumers to limit malicious messages by blocking or limiting certain features on their handsets.

Wireless service providers may need to increase outreach and awareness efforts about available control features, particularly those relevant to the parents of minor mobile phone users. The report cited experts on mobile marketing campaigns to children and a wireless industry initiative to educate parents about safety issues such as cyber-bullying. Although industry best practices related to child users of mobile devices are still being developed, the FTC indicated it would be monitoring this area with particular vigilance.

The range of topics discussed and stakeholders involved in the FTC’s report on M-commerce demonstrate the agency’s commitment to monitoring consumer protection. We will continue to watch for new developments in this sphere.