As part of the increased regulatory focus on the mobile marketing space, the Federal Trade Commission (FTC) brought suit against Wise Media, LLC, and its officers individually, alleging mobile telephone bill “cramming” in violation of the FTC Act and other applicable laws. For those that are unfamiliar with the term, “cramming” is the act of placing unauthorized charges on a consumer’s telephone bill – in the case of Wise Media, it involved placing charges on consumers’ mobile telephone bills. In order to avoid going to court and risk even greater liability, Wise Media decided to settle with the FTC.
Details of Alleged Cramming
According to the FTC complaint, Wise Media allegedly billed consumers for “premium services” delivered via text message, including horoscopes, relationship advice and other information. The FTC further alleged that consumers were charged a monthly, recurring fee of $9.99 without knowingly signing up for the service.
The FTC claims that Wise Media and its personnel 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 alleges that many consumers did not notice or understand Wise Media’s charges, and thus made uninformed decisions to pay the bills. Furthermore, the FTC alleges that to the extent that consumers did notice the charges, the process of obtaining refunds from Wise Media was difficult and often unsuccessful.
Wise Media Settlement Terms
The proposed settlement order contains the following requirements that Wise Media and its officers 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 the purchase and have expressly agreed to be charged;
- Pay a judgment of $10,965,638, which is partially suspended due to Wise Media’s inability to pay the full amount;
- Wise Media’s officer, Brian Buckley, must surrender most of his personal assets along with any remaining assets of Wise Media, valued in excess of $500,000; and
- Wise Media’s other officer, Winston Deloney, along with another defendant who knowingly received ill-gotten gains from Wise Media, Concrete Marketing Research, LLC, must collectively pay a penalty fee of $175,817.
The complaint against Wise Media is part of a larger trend of regulatory action within the mobile marketing space. In light of this action, and the general regulatory trend, mobile service providers that bill for services by and through consumers’ mobile telephone bills should immediately review their marketing practices (and those of their affiliates) and consumer disclosures in order to ensure compliance with applicable law and FTC consent decrees. Entities that fail to comply with applicable law in this vertical could find themselves facing regulatory action from the FTC, which could result in significant fines and penalties.