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How to avoid legal issues in the mobile content space

Cramming – putting unauthorized charges on consumers’ wireless bills – is increasingly becoming an issue that mobile subscribers face, forcing an investigation by Senator Jay Rockefeller (D-WV) into this illegal practice.

Senator Rockefeller has even issued subpoenas as part of his investigation to probe mobile content companies. Additionally, the Federal Trade Commission announced a workshop, further proving that cramming is getting a lot of traction lately.

“In terms of cramming, I think there are some marketers that are less scrupulous in their disclosures and some doing it legitimately,” said Linda Goldstein, partner at Manatt, Phelps & Phillips LLP, a New York-based law firm. “Consumers are not reading everything that has been put before them.

“It is the job of the marketer to make sure consumers understand,” she said.

Florida Attorney General
Florida Attorney General Bill McCollum made several enforcement actions related to cramming. 

For example, in July he reached an agreement with T-Mobile concerning unauthorized billing for third-party charges on consumers’ mobile phone bills.

The settlement, just one in a continuing series of enforcement action in the mobile space by the Florida Attorney General’s office, is very important to mobile marketers because it requires the implementation of a series of detailed “best-practice” standards that impose significant compliance obligations on those involved in marketing mobile content.

The Attorney General’s best practices are meant to protect consumers from third-party “cramming,” including charges for “free” ringtones and other mobile content customers either did not order or did not realize would result in a monthly charge.

But Ms. Goldstein said that these best practices should be the minimum standard, not the maximum for marketers.

“The carriers have imposed specific guidelines in terms of disclosures,” Ms. Goldstein said. “The carrier guidelines should be the minimum requirement.

“You have to look at the particulars of you offers and the impression that the consumer will have,” she said. 

Cracking down on cramming
T-Mobile was the third wireless provider to adopt these standards, with Verizon and AT&T already been involved in these types of mobile content cases.

Mobile phone content includes ringtones, music, wallpaper, horoscopes and other material that is often promoted by online marketers as “free,” but ultimately ends up costing up to $19.99 a month.

The charges appear on a subscriber’s monthly wireless bill and are usually recurring. The bill charges often appear under indiscernible names such as “OpenMarket,” “M-Qube” or “M-Blox.”

A large number of complaints related to the mobile content industry led to an investigation which revealed that thousands of Florida consumers had received these charges on their mobile phone bills for mobile content downloads that they neither knowingly authorized nor desired.

“It’s similar to what has been happening with negative option marketing: Incurring charges without providing billing information,” Ms. Goldstein said. “Advice is to make sure that the disclosure of the materials are really clear, particularly the cost and that it will be billed to the wireless bill.

“Marketers need to get letters of authorization to make sure the person is authorized to make purchases on that particular wireless account,” she said. “Make sure you get some sort of affirmative active consent.

“Take a step back and look at the offer and ask yourself is it likely a consumer will understand the terms and conditions. Monitor the complaint levels. See if your consumer complaints are spiking for charge backs.”