FTC Settles Deceptive Advertising Lawsuit with Mobile Marketer for $4 Million

dollar_sign1On June 9, 2014, the United States District Court for the Southern District of Texas entered a Stipulated Final Judgment and Order for Permanent Injunction and Other Equitable Relief (the “Order”) against Advert Marketing, Inc. and its three principals (“Advert”) and in favor of the Federal Trade Commission (“FTC”).  On March 6, 2013, the FTC filed an action against Advert, alleging that Advert’s text message marketing campaign was deceptive and unfair under Section 5 of the FTC Act.  Advert agreed to settle the lawsuit after the FTC moved for summary judgment at the close of discovery.

Advert’s Alleged Deceptive Advertising

The FTC alleged that Advert sent text messages nationwide to up to 70.5 million consumers, promising “free” gift cards, such as $1,000 gift cards from Walmart, Best Buy and Target.  However, according to the FTC, Advert failed to disclose material terms and conditions associated with obtaining the free gift card offers, including actual costs.  In fact, the FTC alleged, most consumers were never actually successful in obtaining the gift cards.  Advert and its principals allegedly purchased at least 1,495 SIM cards in bulk with unique telephone numbers and area codes throughout the county in order to send the unlawful text messages at issue.  Thereafter, Advert and its principals used multiple email addresses to activate the SIM cards, using aliases and false physical addresses to advance the scheme.  Advert was also accused of using affiliate networks to assist it in sending the alleged unlawful text messages.

The Settlement

As part of its settlement for deceptive advertising, Advert and its principals agreed to be enjoined from failing to disclose material terms associated with its offers including, but not limited to, that a good or service is “free” or without cost or obligation, when this is not the case.  Disclosures must be in “the same color, font, and size, and within close proximity to such representation, that a purchase is required, or that purchases are required, to obtain such gift or prize, when such is the case.”  Moreover, on any landing page associated with any Advert advertising, Advert must prominently include a “list of monetary obligations a consumer is likely to incur to obtain the advertised gift or prize; and . . . [a] list of any non-monetary obligations a consumer is likely to incur to obtain the advertised gift or prize . . . .”  In addition, the parties agreed to a judgment in favor of the FTC in the amount of Four Million, Two Hundred Thousand Dollars ($4,200,000.00).  Although the judgment is suspended, each principal and Advert must pay $15,000 to the FTC.

Protect Yourself

As we have previously blogged, the FTC has been incredibly active in pursuing unscrupulous Internet and text messaging marketers.  Using the powers of the FTC Act, the CAN-SPAM Act, the Telephone Consumer Protection Act, and other regulatory laws and rules, the FTC has been especially vigilant in its efforts to ensure that marketers comply with the law. 

If you are interested in reviewing your marketing practices, or if you have been served with legal process relating to your advertising, please e-mail us at info@kleinmoynihan.com or call us at (212) 246-0900.

The material contained herein is provided for informational purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney.  Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.

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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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