Last month, the Federal Trade Commission (“FTC”) took its first steps into the arena of SMS text messaging litigation, suing an individual named Phillip Flora who allegedly sent more than 5 million unsolicited text messages in a 40-day span beginning in August 2009. This lawsuit should be a concern for companies involved in text-message marketing campaigns, as it signals the FTC’s willingness to tackle the issue of SMS spam. Coupled with consumer class actions under the Telephone Consumer Protection Act, 47 U.S.C. 227 (“TCPA”), enforcement actions like this one could have a significant impact on the mobile marketing landscape.

What Happened

On February 22, 2011, the FTC filed suit in the United States District Court for the Central District of California, alleging that Flora engaged in the practice of sending unauthorized and unsolicited commercial text messages, as well as unsolicited commercial e-mail. See FTC v. Flora, Case No. 11-cv-00299 (C.D. Cal.). The FTC alleged that Flora sent unsolicited text messages to millions of Americans, offering to help them obtain mortgage loan modifications and directing those consumers to his Web site: loanmodgov. net. Based on these text messages, the FTC has asserted causes of action under Section 5 of the FTC Act, 15 U.S.C. 45, for 1) unfair transmission of text message spam, and 2) deceptive representations. The FTC’s complaint contends that Flora’s use of “gov” in the text messages and in his Web site’s domain name is deceptive because it implies a government affiliation when in fact Flora has no connection with the U.S. government. Flora also allegedly sold the wireless telephone numbers of consumers who responded to his text messages as “debt settlement leads” and promoted his text messaging service by sending spam e-mails that offered to transmit large numbers of commercial text messages to consumers on behalf of third parties in exchange for a fee. Based on these e-mails, the FTC also has asserted a causes of action under the CAN-SPAM Act, 15 U.S.C. 7704, for 1) failure to provide notice of opt-out in the e-mails, and 2) failure to include a physical postal address in the e-mails. The complaint seeks both injunctive and monetary relief, including restitution, the refund of any monies paid, and disgorgement of ill-gotten monies.

What It Means

The Flora case is a clear indication that the FTC is no longer willing to stand on the sidelines of the text-message marketing arena. The FTC has interpreted Section 5’s prohibition on “unfair or deceptive acts or practices in or affecting commerce” as giving it the authority to challenge text-messaging campaigns that it believes are unfair. The complaint states that “Defendant Flora’s practice of initiating or procuring the transmission of unauthorized or unsolicited commercial electronic text messages to the mobile telephones and other wireless devices of consumers . . . has caused or is likely to cause substantial injury to consumers that consumers cannot reasonably avoid themselves and that is not outweighed by countervailing benefits to consumers or competition.”

What You Should Do

Although the FTC’s application of Section 5 to text messaging remains untested for now, any company engaged in mobile marketing should be wary of the fact that ill-conceived text-message campaigns may draw the attention of not only plaintiffs’ class action attorneys relying on the TCPA, but also the FTC. It is therefore more important than ever for companies to carefully consider legal compliance issues before launching mobile-marketing campaigns.