In June, we informed you of the Federal Trade Commission’s (“FTC”) settlement with mobile marketer Tatto, Inc. and other third-party entities. (See Mobile Marketing Companies Settle FTC Mobile Cramming Lawsuit for $150 Million). The FTC has now settled its claims against Tatto’s principal, Andrew Bachman. In total, the settlement with Mr. Bachman is a whopping $97 million. Although the judgment is partially suspended, the terms Mr. Bachman consented to in order to resolve the FTC’s claims against him personally are extraordinary. Mr. Bachman will surrender more than $1.2 million in assets to the FTC as part of the settlement agreement.
Details of Alleged Mobile Cramming
According to the FTC complaint, Mr. Bachman’s companies allegedly billed consumers for premium text message services that offered “love tips,” “fun facts” and celebrity gossip alerts, and placed charges for these services – typically $9.99 a month – on consumers’ bills without their permission.
The FTC alleged that Mr. Bachman, his companies and employees, respectively, have taken advantage of the fact that consumers may not expect their mobile phone bills to contain charges from third parties. As a result, the FTC charged that many consumers did not notice or understand the charges, and thus made uninformed decisions in paying their bills. Furthermore, the FTC alleged that to the extent that consumers did notice the charges, the process of obtaining refunds from Mr. Bachman’s companies was difficult and often unsuccessful.
Mobile Cramming Settlement Terms
The proposed settlement order contains the following requirements that Mr. Bachman must abide by:
- Permanently refrain from placing any charges on consumers’ telephone bills or assisting anyone else in doing so;
- Cease using any other method to charge consumers for goods or services without ensuring that the consumers are aware of the terms of purchase and have expressly agreed to be charged; and
- Pay a monetary judgment of $97,090,351.00, which will be partially suspended based on Mr. Bachman’s inability to pay the full amount.
Mr. Bachman will also be forced to surrender a substantial number of assets, including:
- the contents of four (4) bank accounts (although Mr. Bachman is allowed to retain a mere $4,500.00;
- shares in four (4) other companies;
- two (2) vehicles: a 2012 Ferrari 458 Italia and a 2012 Mercedes G550 SUV; and
- numerous items of jewelry, including three (3) Audemars watches, one (1) Patek Phillippe watch, and four (4) Rolex watches.
Regulatory authorities have increased their enforcement of various anti-cramming laws. The trend also indicates an increased targeting of the principals of marketing companies that have allegedly engaged in deceptive marketing and/or fraudulent billing. As a result, the legal “corporate shield” appears to be fading and owners are putting themselves at the mercy of regulators. It is critically important, therefore, that marketing companies and their principals avail themselves of competent legal counsel in order to protect their business and individual assets.