Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: Affiliate marketing company settles FTC spam texting charges, (Nov 20, 2013)

By Tobias J. Gillett, J.D., LL.M.

An affiliate marketing company and four of its principals have agreed to settle FTC charges that they sent more than 30 million deceptive text messages that directed consumers to similarly deceptive websites (FTC v. Ecommerce Merchants, LLC, FTC File No. 132 3048, Case No. 1:13-cv-01534).

According to the FTC’s complaint, since at least March 2012, Ecommerce Merchants, LLC and its principals—Cresta Pillsbury, Jan-Paul Diaz, Joshua Brewer, and Daniel Stanitski—sent the text messages to promote various products and services, including certain purportedly free merchandise, such as $1,000 gift cards to retail companies like Walmart and Best Buy, and products such as an Apple iPhone or iPad. The messages would typically expressly state or imply that the consumers had won a contest or had been specially selected to receive a gift or prize.

The text messages would contain a link that, when clicked, would send consumers to a website that would ask them to enter a code contained in the text message. When the code was entered, the website would claim it was “valid” and then transfer the consumers to third party websites. Although the third party websites would repeat the free merchandise offers, they would require consumers to participate in various offers in order to receive the merchandise. In most cases, consumers would not be able to receive the merchandise without spending money, but the text messages failed to disclose that fact or the costs and obligations associated with participating in the third party promotions.

The complaint asserted claims for failure to disclose material information and for causing injury to consumers through sending them unsolicited text messages for which they may have to pay, in violation of Section 5 of the FTC Act.

The stipulated final judgment and order against Pillsbury, Diaz, Brewer, and Stanitski bars them from (1) sending, or assisting others in sending, unsolicited text messages to mobile devices; (2) misrepresenting any material facts about a good or service, including that it is free or without obligation, that a consumer has won a contest, gift, or prize, the reason for which consumers’ personal information is being collected, the extent to which consumers’ privacy would be protected, or other material aspects of a product, service, or refund policy; (3) failing to clearly and prominently disclose the terms and conditions of any offer; and (4) operating n affiliate network for deceptive purposes. The defendants must also inform members of any future affiliate of the terms of the order and must monitor the affiliates to prevent them from conducting deceptive or unfair activities.

The judgment also imposes a monetary judgment against the four individuals in the amount of $356,930, allegedly the amount of money the defendants earned from the scheme after paying their affiliates, which will be suspended due to the defendants’ inability to pay. The defendants are also prohibited from using consumer information acquired through the scheme, and must destroy the information within 30 days of entry of the order. The defendants must also cooperate with any future FTC investigations.

The court also entered a default judgment against the corporate defendant, Ecommerce Merchants, that contains similar provisions to those in the final order against the individual defendants. The FTC previously obtained final judgments in similar text messaging spam cases against Henry Nolan Kelly and Rentbro, Inc.

Companies: ECommerce Merchants, LLC

News: ConsumerProtection FederalTradeCommissionNews