Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: Commissioner McSweeny updates Congress on mobile cramming issues, (Jul 31, 2014)

By Greg Hammond, J.D.

FTC Commissioner Terrell McSweeny testified before Congress yesterday on the Commission’s efforts to stop mobile cramming. In prepared remarks, “Cramming on Wireless Phone Bills: A Review of Consumer Protection Practices and Gaps,” McSweeny informed the U.S. Senate Commerce Committee that mobile cramming—the act of placing unauthorized third-party charges on mobile phone accounts—remains a significant consumer protection issue in the United States.

“Mobile cramming is a significant problem that threatens to undermine confidence in the developing payment method known generally as ‘carrier’ billing, which offers consumers the opportunity to charge goods and services to their mobile phone accounts,” according to the testimony. “As carrier billing has developed, however, fraud has become a significant problem for consumers.”

Enforcement. Since 2013, the FTC has brought five mobile cramming cases against merchants that resulted in substantial monetary judgments. The most notable judgment was reached in June against Tatto, Inc., in which the company ran deceptive web advertisements that promised consumers the chance to win prizes in return for their mobile phone numbers. Consumers did not receive any prizes, but were signed up for the company’s subscription plans. Tatto agreed to a partially suspended judgment of over $150 million.

More recently, the Commission filed its first mobile cramming action against a telecommunications company—T-Mobile USA, Inc. The FTC alleged that T-Mobile unlawfully charged consumers for unauthorized monthly text message subscriptions offered by third-party merchants, and deceptively described the charges under the general term “Use Charges.”

“These actions all reinforce the basic principle that a company must obtain a consumer’s express, informed consent before placing charges on their bills—which applies to the mobile environment just as it does to brick-and-mortar companies.”

Best practices. In response to the growing mobile cramming issue, the Commission made a number of best practice recommendations to the Senate Committee, including: (1) mobile providers should give consumers the option to block third-party charges from their mobile phone accounts, or to block some or all providers; (2) consumers should be adequately informed of all third-party charges on their accounts; and (3) mobile carriers should provide customers with a clear and consistent process to dispute suspicious charges on their mobile accounts and to obtain reimbursement.

Companies: T-Mobile USA, Inc.

News: ConsumerProtection FederalTradeCommissionNews