Spending on mobile phone marketing in the U.S. is expected to increase steadily from $421 million in 2006 to approximately $5 billion in 2011.
But as more companies move into the mobile space, many are struggling to figure out how laws written in the “wired” world will apply in today’s wireless environment. A recent series of lawsuits over mobile marketing practices demonstrates the importance of understanding the legal requirements. Campaigns that involve promotional text messages are governed either by the CAN-SPAM Act or the Telephone Consumer Protection Act, depending on what technology is used to send the messages. And although the requirements vary depending on which federal statute applies, the key in most cases is to obtain permission before sending the messages.
Make sure people know what they are agreeing to. When seeking permission, you should clearly disclose that the consumer (a) is agreeing to receive messages from you on a wireless device, (b) may incur wireless charges, and (c) may opt-out at any time. Your legal counsel can help you determine which laws apply and what needs to be disclosed where. But ensuring you get permission before sending the messages and promptly honoring opt-out requests goes a long way toward preventing the complaints and lawsuits that have plagued some companies.
PREMIUM CHARGES
Over the past few years, a number of lawsuits were filed because of unexpected charges on mobile phone bills. In addition, the Florida Attorney General also challenged AT&T Mobility over advertisements run by a third party.
The AG alleged that the ads touted “free” services, but buried disclosures about costs in the fine print. As part of the settlement, AT&T agreed to pay $2.5 million and to provide an estimated $10 million worth of rebates to consumers.
In addition to these payments, AT&T is required to include various provisions in its contracts with mobile advertisers. Among other things, AT&T must require advertisers to disclose costs of a free offer at the outset of the offer and provide specific disclosures on various parts of the order flow.
AT&T must also prohibit marketers from requiring consumers to receive text messages unrelated to the purchased content and from using pre-checked boxes for acceptance of terms. Although the settlement applies only to AT&T, the Florida AG is pushing other wireless carriers to agree to similar terms.
If you are a mobile marketer, you would be well advised to review the terms of the AT&T settlement and ensure your campaigns are in compliance. And if you do business with mobile marketers, consider revising your contracts to ensure your partners comply.
MOBILE SWEEPSTAKES
It is unlawful to require consumers to make a payment to enter a sweepstakes. It is, however, generally lawful to offer a sweepstakes in which people can enter through a method that involves a payment as long as there is also a free method of entry. The free method of entry must be clearly disclosed, and all entries must be treated equally. Recently, marketers ran sweepstakes in conjunction with the television shows “American Idol,” “The Apprentice,” “Deal or No Deal,” and “1 vs. 100.” These sweepstakes allowed consumers to enter by sending a text message that was subject to a 99-cent charge, or by filling out a free online entry form.
Last year, plaintiffs filed class-action lawsuits in California and Georgia arguing that the sweepstakes were unlawful, notwithstanding the free method of entry. The arguments are based, in part, on the notion that individuals who enter using their mobile phones don’t get anything of value for the money they pay to enter. In April, the Georgia Supreme Court determined that the Deal or No Deal sweepstakes did not violate state gambling laws. Although the decision is a victory for mobile marketers, it is too early to celebrate or to conclude that it is safe to charge premium text fees for entries in sweepstakes (even with a free alternate method of entry). There are still class actions pending in California, and the defendants may face tougher battles there. Marketers should consult with their legal counsel before offering any mobile sweepstakes.
Technology always moves faster than the law, and lawmakers are currently considering how to apply existing laws in the wireless world and whether new laws are needed. Mobile marketers must remain vigilant so that they can identify changes to the legal landscape and quickly adapt their marketing campaigns accordingly.
Gonzalo E. Mon is an attorney in Kelley Drye & Warren’s Advertising and Marketing Law practice. He may be reached by e-mailing gmon@kelleydrye.com or calling 202-342-8576.
