Marketing via Mobile Devices:
Enforcement and Litigation Trends
Melissa Landau Steinman
October 26, 2010
1
Mobile Marketing Overview
One Overriding Principle: The Customer Must be in Control of the Relationship
“The customer is king (or queen).”
2
Statutes/Regulations that Could Apply to Mobile Marketing

The Telephone Consumer Protection Act of 1991 (“TCPA”) and FCC
Rules implementing the TCPA

The Federal Trade Commission Act (“FTC Act”) and the
Telemarketing Consumer Fraud and Abuse Prevention Act and
implementing regulations, including Telemarketing Sales Rule and
Do-Not-Call List

The Controlling the Assault of Non-Solicited Pornography and
Marketing Act (“CAN-SPAM Act”)

State laws regulating telemarketing, email marketing and privacy

Industry self regulation (e.g., MMA US Consumer Best Practice
Guidelines for Cross-Carrier Mobile Content Programs, DMA and
other industry guidelines)
3

Customer Proprietary Network Information (“CPNI”) Rules

Lanham Act/State “Little FTC” Acts and false advertising laws
Mobile Marketing Overview
4
I.
Mobile marketing defined: Business and legal
trends
II.
Laws implicated and key areas of potential
liability
III.
Pending regulatory activity and industry
advocacy efforts
Key Areas of Potential Liability
5

Statutory violations

Unauthorized charges

Tortious interference

Breach of contract

Privacy issues

2008: Timberland Co. and GSI Commerce
settled charges under the TCPA for unsolicited
text messages advertising Timberland’s holiday
sale.
–

Settlement: $7 million to the class and $150
per plaintiff.
2009: Simon & Schuster was sued for TCPA
violations for sending text messages promoting
the Stephen King novel Cell.
–
Settlement: $10 million to the class and $175
per plaintiff
Satterfield v. Simon & Schuster, 569 F.3d 946, 951 (9th Cir. 2009).
6
Recent Litigation under TCPA

Lozano v. Twentieth Century Fox Film Corp. (N.D. Ill 2010).
» District Court rejected defendant’s argument that
TCPA only prohibits calls that result in a charge
to the recipient

7
Kazemi v. Payless Shoesource, Inc. (N.D. Cal. 2010).
Espinal v. Burger King Corp. (S.D. Fl 2010)

October 13, 2010: Federal Judge approved a class-action
settlement of $510K

Espinal alleged that Burger King violated the TCPA by
sending unsolicited text advertisements to thousands of cell
phones nationwide

The reply “stop” feature of the promotion did not function.

BK will pay $250 to each class member who received an
unauthorized text message that related to BK promotion

BK agreed to curb its sending of unauthorized
text messages in the future
8
Industry Standards and Best
Practices

Guidelines Issued by the Direct Marketing Association (“DMA”), Mobile
Marketing Association (“MMA”) and CTIA, The Wireless Association

Address issues such as:
– Security
• Privacy Policies
• Privacy/Data Breaches
– Notice
• Choice & Consent
• Opting Out
• Consent is Program-Specific
9
Mobile Marketing Association Guidelines

The MMA’s U.S. Consumer Best Practices Guidelines for
Cross-Carrier Mobile Content Programs last updated June
2010.

Address mobile-specific marketing issues such as:
– Deactivated and recycled numbers
– Standard rate single opt-in and premium rate
double opt-in via SMS
– Subscription programs
– Mobile “chat”
– Disclosure of offer terms and conditions
10
MMA’s “Mobile Advertising Guidelines”

Comprehensive, technically-oriented guidelines
for creating ads, including:
–
–
–
–
11
Downloadable applications
Formats
Dimensions
Aspect ratios
MMA’s Program Specific Publications
12

Mobile Marketing Sweepstakes and Promotions Guide

Introduction to Mobile Coupons
Direct Marketing Association (“DMA”)
Guidelines for Ethical Business Practice

Provide guidelines for ethical and
legal conduct for different types of
direct marketing using different
vehicles, including sweepstakes
and other types of promotions
13
CTIA—The Wireless Association

CTIA Guidelines primarily address duties of wireless
carriers.

Several potentially relevant documents:
• Best Practices and Guidelines for Location
Based Services
• Consumer Code of Conduct
• Content Classification Criteria
14
Opt-in Consent

DMA suggests single opt-in.

MMA suggests single or double opt-in, depending on the
circumstances:
– Double opt-in for promotions where subscriber
incurs a charge that is higher than usual (e.g.,
$0.75 per message).
– Single opt-in for promotions where the customer
receives no charge or where subscriber incurs
standard text message charges (e.g., $0.75 per
message).
15
Opt-in Consent

Content providers must obtain specific, express approval
from subscribers before sending them commercial SMSs
and other content.

MMA references how to do this (e.g., “text YES to 474747”)

When keywords (such as YES and STOP) are referenced in
the document, use of other languages is optional depending
on the target demographic for the program.
16
Opt-in Consent

The goal of any opt-in is to clearly communicate to the
subscriber the financial obligation they are about to incur by
entering the program.

MMA recommends specific language: “Message and data fees
may apply.”

Provider should also communicate that the subscriber may
revoke his authorization at any time, and how to do it (“Text
STOP to stop receiving messages”), and how to get help (e.g.,
“Text HELP for help”).

17
Selling mobile opt-in lists is prohibited.
Mobile-Specific Marketing

These organizations incorporate into their guidance best
practices and legal compliance requirements in specific
areas such as:
–
–
–
–
–
18
Advertising to Children
Word-of-Mouth Marketing
Affiliate Marketing
Use of the word “free”
Disclosure of offer terms or conditions
Special Issues for Mobile/Wireless
Prize Promotions

Lotteries are prohibited under federal laws and
the laws of all fifty states, usually as a form of
gambling.

A lottery has three elements: (1) prize, (2)
chance, and (3) consideration.

Costs incurred as a result of using a mobile
device to enter a promotion (e.g., texting fees)
may constitute consideration.
19
American Idol/Deal or No Deal Cases

In 2007, class action cases challenged the text message games in TV
shows Deal or No Deal, American Idol, 1 vs. 100, and America’s Got
Talent

Audience members could enter the game via text message, but would
incur a $0.99 premium text message fee. They could enter for free via the
Internet.

GA Supreme Court held that state gambling law was not violated because
the participant did not compete against the game sponsor, there was no
“winner,” and there was not a wager on the outcome.
–

CA cases are still pending. They challenge the established proposition
that an alternative method of entry eliminates the element of consideration
from promotional games. They also raise the question of whether the
Internet can be relied on as a free alternative method of entry.
–
20
Hardin v. NBC Universal, Inc. et al., 660 S.E.2d 374 (Ga. 2008)
Bentley v. NBC Universal, Inc., No. 2:07-CV-03647 (C.D. Cal.); Herbert v. Endemol USA,
Inc., No. 2:07-CV-03537 (C.D. Cal.); and Cunningham v. Endemol USA, Inc., No. 2:07-CV3643 (C.D. Cal.)
Text Message Promotions
21

Text message promotions should include a free AMOE that
will not require consumers to pay text messaging fees or
otherwise incur any costs.

The California class action raises questions as to whether
even a free AMOE will be sufficient.

Until the California case is resolved, companies should at
minimum (a) avoid any method of entry that has a premium
cost associated with it unless there is some value associated
with the charges (a ringtone, a t-shirt, etc.) and (b) ensure
the availability of a free AMOE.
Disclosure of Prize Promotion
Terms and Conditions/Registration

As with all promotions, must disclose Official Rules
prior to entry; disclosure is complicated by medium
(smaller screen, etc.)

At minimum, need link to complete rules from ads on
mobile screen.

Ads in other media should make more complete
disclosures.

Promotion sponsors may wish to require registration
online for more complicated promotions.
22
False Advertising Under the Lanham Act

Section 43(a) of the Lanham Act prohibits false
statements made in commercial advertisements that
are likely to deceive consumers and likely to cause
injury to the plaintiff.
23
Elements of a Lanham Act/False Advertising Claim
1.
Defendant made a false or misleading
statement of fact in a commercial
advertisement about a product;
2.
Statement either deceived or had the
capacity to deceive a substantial segment of
potential
consumers;
3.
Deception is material, in that it is likely to
influence the consumer’s purchasing
decision;
4.
Product is in interstate commerce; and
5.
Plaintiff has been or is likely to be injured as
a result of the statement.
Clorox Co. Puerto Rico v. Procter & Gamble
Commercial Co., 228 F.3d 24, 33 (1st Cir.
2000).
24
Advocacy Issues

Some advocacy groups have expressed opinions in the mobile
marketing/privacy space. (ACLU, Center for Digital Democracy,
Electronic Frontier Foundation, Consumers Union, Privacy Rights
Clearinghouse)

In 2010, the Wall Street Journal began running a series of articles called
‘What They Know’
http://online.wsj.com/public/page/what-they-know-digital-privacy.html

The series addressed the collection of personal data on websites and
on-line ads, online behavioral advertising and GPS tracking technology
in cell phones.
25
Advocacy Issues
26

Since the article, 17 consumer advocacy groups sent a
letter to the Chairman of the FTC asking the
Commission to propose a comprehensive statutory
and regulatory solution to address the deficiencies in
American’s privacy rights.

In August, 6 organizations sent letters to the Chair and
Ranking Member of both the House and Senate
Commerce Committees asking them to investigate
Microsoft Corp. and to hold hearings on consumer
privacy issues.