FTC COMPLAINTS (AS REPORTED IN AN EARLIER ISSUE):

  • The Federal Trade Commission (the “FTC”) filed eight (8) different complaints charging 29 defendants with collectively sending over 180 million unsolicited text messages to consumers.
  • Many of the recipients had to pay for the unwanted incoming messages.
  • According to the FTC complaint, defendants sent text messages to random phone numbers, even to those consumers who did not have a text messaging subscription plan.
  • The links in the unwanted messages directed consumers to sites that collected a great deal of personal information for the stated purpose of requiring shipping information in order to send “free” gift cards.
  • The FTC alleged that consumers were unaware that the personal information collected from them was sold to third parties for marketing purposes.
  • After entering their personal information, users were directed to another site indicating that they would be required to participate in a number of “offers” in order to be eligible for the advertised gift cards.
  • According to the complaint, in some instances, consumers had to sign up for as many as 13 of the offers, some of which were for recurring subscriptions, requiring consumers to provide credit card information.
  • In addition, the FTC alleged that once a consumer actually completed all of the “offers,” they were notified that in order to receive the subject “free” gift card, they had to find three (3) other individuals who would also complete the series of offers.

VIOLATIONS OF THE FTC ACT:

  • The operators of these sites are charged with violations of the FTC Act for failing to inform consumers of all of the conditions connected to the “free” gift cards, especially the possibility that they would be obligated to spend money in order to receive the gift cards.
  • According to the FTC, the group of defendants who actually sent the text messages were compensated by the operators of the “free” gift websites, based upon how many consumers ultimately entered their personal information.
  • The operators of the sites were then paid by those businesses who received customers or subscribers through the above-described “offer” process.

SETTLEMENT:

  • Twelve defendants that allegedly enticed consumers with fake offers of “free $1,000 gift cards” for major retailers have agreed to pay $2.5 million to settle the FTC charges.
  • Defendants are banned from engaging in the distribution of unwanted and unsolicited text messages.
  • They are also prohibited from misrepresenting whether a good or service is actually “free” or whether a consumer has won a prize or contest.
  • Defendants may not mislead consumers about why they are collecting a consumer’s personal information, namely whether it will be sold or the extent to which they will protect the person’s privacy.
  • Finally, defendants are banned from using a consumer’s personal information that has been collected through the alleged scam and must also destroy the information once the court approves the settlement.

TAKE AWAY:

  • The FTC is clearly paying attention to affiliate marketers who "bombard" consumers with unsolicited or unwanted text messages, especially those containing deceptive or false promises.
  • There are many legal nuances that must be navigated to successfully run a text message marketing campaign. As such, before embarking on such an endeavor, it is essential that companies seek the advice of experienced marketing counsel.