On June 9, 2014, the United States District Court for the Southern District of Texas entered a Stipulated Final Judgment and Order for Permanent Injunction and Other Equitable Relief (the “Order”) against Advert Marketing, Inc. and its three principals (“Advert”) and in favor of the Federal Trade Commission (“FTC”). On March 6, 2013, the FTC filed an action against Advert, alleging that Advert’s text message marketing campaign was deceptive and unfair under Section 5 of the FTC Act. Advert agreed to settle the lawsuit after the FTC moved for summary judgment at the close of discovery.
Advert’s Alleged Deceptive Advertising
The FTC alleged that Advert sent text messages nationwide to up to 70.5 million consumers, promising “free” gift cards, such as $1,000 gift cards from Walmart, Best Buy and Target. However, according to the FTC, Advert failed to disclose material terms and conditions associated with obtaining the free gift card offers, including actual costs. In fact, the FTC alleged, most consumers were never actually successful in obtaining the gift cards. Advert and its principals allegedly purchased at least 1,495 SIM cards in bulk with unique telephone numbers and area codes throughout the county in order to send the unlawful text messages at issue. Thereafter, Advert and its principals used multiple email addresses to activate the SIM cards, using aliases and false physical addresses to advance the scheme. Advert was also accused of using affiliate networks to assist it in sending the alleged unlawful text messages.
As part of its settlement for deceptive advertising, Advert and its principals agreed to be enjoined from failing to disclose material terms associated with its offers including, but not limited to, that a good or service is “free” or without cost or obligation, when this is not the case. Disclosures must be in “the same color, font, and size, and within close proximity to such representation, that a purchase is required, or that purchases are required, to obtain such gift or prize, when such is the case.” Moreover, on any landing page associated with any Advert advertising, Advert must prominently include a “list of monetary obligations a consumer is likely to incur to obtain the advertised gift or prize; and . . . [a] list of any non-monetary obligations a consumer is likely to incur to obtain the advertised gift or prize . . . .” In addition, the parties agreed to a judgment in favor of the FTC in the amount of Four Million, Two Hundred Thousand Dollars ($4,200,000.00). Although the judgment is suspended, each principal and Advert must pay $15,000 to the FTC.
As we have previously blogged, the FTC has been incredibly active in pursuing unscrupulous Internet and text messaging marketers. Using the powers of the FTC Act, the CAN-SPAM Act, the Telephone Consumer Protection Act, and other regulatory laws and rules, the FTC has been especially vigilant in its efforts to ensure that marketers comply with the law.