Earlier this week, AT&T Mobility, LLC (“AT&T) entered into a Stipulated Order for Permanent Injunction and Monetary Judgment with the Federal Trade Commission (“FTC”) relating to allegations of mobile “cramming,” the unlawful practice of placing unauthorized third-party charges on mobile telephone bills.

$105 Million Mobile Cramming Settlement

As part of the settlement, AT&T agreed to pay $105 million as follows: (i) $80 million to the FTC for consumer redress; (ii) $20 million to numerous states as part of a “Multi-States Attorneys General Settlement;” and (iii) $5 million to the United States Treasury on behalf of the FCC as part of an FCC settlement.

The FTC, through a third party settlement administrator, is providing a claims-based refund pool for AT&T customers who were billed since January 1, 2009 for third party charges to their mobile telephone bills which were allegedly unauthorized.

In addition to the large monetary component of the settlement, AT&T is further required to, among other things:

  • Develop and implement a system by February 1, 2015 to obtain “Express Informed Consent” from its customers before placing any third party charges on their mobile telephone bills;
  • Implement a system that provides customers with purchase confirmations separate from customer telephone bills within a reasonable amount of time following the purchase of third-party products/services;
  • Provide a clear and conspicuous disclosure to customers about third party charges and customers’ ability to completely block them from their telephone bills; and
  • Notify all of its current customers who were billed for allegedly unauthorized third party charges of the settlement by text message, email, paper bill insert and online bill notification.

The FTC’s Goal in Thwarting Mobile Cramming

As we previously reported, the FTC has issued best practice guidelines to combat mobile cramming.  The AT&T settlement demonstrates the tremendous potential penalties that may arise from cramming allegations (and their associated judgments or settlements).  For anyone in this space, it is important to keep abreast of new developments and to understand those state and federal laws applicable to mobile telephone billing, as well as the Mobile Marketing Association’s own set of guidelines.