The Federal Trade Commission (“FTC”) recently filed its amended complaint in the action captioned Federal Trade Commission v. Acquinity Interactive, LLC, et al., Case No. 14-CV-60166 (S.D. Fl.), naming the owners of several companies allegedly engaged in a text message and robocall scheme involving offers for “free” merchandise, such as gift cards and iPads.
The Alleged Scheme
According to the Amended Complaint, Defendants lured consumers to different “free” merchandise websites through a text message marketing campaign. The subject text messages allegedly notified consumers that they had won a contest or were otherwise specially selected to win a prize.
Where the consumers clicked the links in the subject text messages, they were then sent to a website requiring them to enter a specific code contained in the text message or other information in order to receive the prize. After completion of the prize page, they then would be directed to a second, “registration” page. According to the FTC, that page would contain a prominent message indicating, for example, “Congratulations! Tell us where to send your Free New iPad!”
The registration page contained fields requesting that consumers enter their personal information in order to receive the free gift, such as the applicable consumer’s name, mailing address, email address, date of birth, mobile telephone number and home telephone number. Once the required information was submitted, the consumers would be led to a page or series of pages requiring them to complete assorted surveys. Like the registration page, the survey pages requested that consumers submit a significant amount of personal information, including their applicable income ranges and credit card debt. Each page purportedly represented that the consumers were submitting their personal information in order to receive the promised free merchandise.
Consumers were usually required to complete a total of thirteen offers in order to qualify for the promised free merchandise. Many of the offers required that the consumers incur some obligation, such as applying and qualifying for credit cards or paying a certain amount of money. Some of the offers also had negative option components in which consumers who did not cancel would be billed automatically and indefinitely on their mobile telephone bills.
According to the Amended Complaint, in most cases, it was impossible for consumers to qualify for the promised free merchandise without spending money. In most cases, consumers never even received the advertised “free” merchandise.
Text Message Marketing to Mobile Telephones
To the extent that consumers entered their mobile telephone numbers to qualify to receive “free” merchandise, they were sent a four digit pin. If they entered that pin number into the free merchandise website, consumers would become enrolled in a premium SMS service and would be charged a monthly fee of $9.99 that would appear on their mobile telephone bills.
Robocalling
Telemarketing through use of robocalls is another component of the alleged scheme. According to the FTC, defendants obtained consumers’ telephone numbers from information provided by consumers on the free merchandise websites and without the requisite express consent.
The Amended Complaint alleges that the individual defendants, as well as their companies, violated the FTC Act by, among other things, failing to disclose the material terms and conditions of their offers and collecting consumers’ personal information that they shared with third parties (rather than to send consumers the promised free merchandise).
The Amended Complaint further alleges that certain of the individual defendants and their respective companies violated the Telemarketing Sales Rule by initiating outbound telephone calls delivering prerecorded messages to consumers in order to induce the purchase of goods or services when the consumers had not provided prior express consent to receive such calls.
Through the action, the FTC is seeking a preliminary injunction and permanent injunction freezing defendants’ assets and restraining future violations of the FTC Act. The FTC is also seeking complete disgorgement of “ill-gotten monies” and consumer restitution, along with its costs associated with bringing the action.
If you are interested in learning more about this topic, or if you are facing an FTC investigation or other regulatory complaint, 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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