FTC Goes After Text Message Fraud

Last week, the Federal Trade Commission (FTC) filed a complaint in the United States District Court for the Northern District of Illinois, targeting several prominent advertising companies, including SubscriberBASE and All Square, for what it alleges are deceptive and unfair advertising practices.

SubscriberBASE and All Square maintain several websites which advertise “free” merchandise to consumers and utilize unsolicited text message services of third parties to drive consumer traffic to their sites.  Before receiving the promised free merchandise offered by SubscriberBASE and All Square, consumers must submit their personal information, and often times pay or sign up for other services offered by the defendants and third party advertisers.

The FTC alleges that the text message services and websites provided by SubscriberBASE and All Square do not clearly disclose the obligations to receive the free merchandise.  The FTC also claims that consumer personal information is obtained under false pretenses and is being sold to third parties, unbeknownst to the consumers.  Finally, the FTC alleges that consumers are charged a fixed fee for receiving the advertisers’ text messages and these fees cannot be reasonably avoided.  In addition to enjoining these advertising practices, the FTC is seeking to freeze the defendants’ assets; rescind any consumer contracts and reimburse their out-of-pocket expenditures; disgorge the defendants of all ill-gotten monies; and recover the FTC’s costs of investigating and bringing the action in Federal Court.

The outcome of this case should be of interest to text message marketing companies and those generally interested in the Internet and mobile marketing spaces.

If you are interested in learning more about this topic or pursuing a text message-based advertising campaign, please e-mail us at info@kleinmoynihan.com, or call us at (212) 246-0900.

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David Klein

David Klein is one of the most recognized attorneys in the technology, Internet marketing, sweepstakes, and telecommunications fields. Skilled at counseling clients on a broad range of technology-related matters, David Klein has substantial experience in negotiating and drafting complex licensing, marketing and Internet agreements.

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