Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: FTC files complaint against “massive mobile phone cramming operation”, (Dec 16, 2013)

By Linda O’Brien, J.D., LL.M.

The FTC announced today that it is taking action to stop a widespread mobile phone cramming scheme that has placed tens of millions of dollars on consumers’ mobile phone bills without their permission (FTC v. Tatto, Inc., FTC File No. 112-3181).

In its complaint, the FTC charges that Lin Miao and Andrew Bachman, through a series of interrelated companies that they owned or controlled, sent text messages to consumers and placed monthly subscription fees for these messages on consumers’ mobile phone bills without their authorization. The practice, known as “mobile cramming,” allows third parties to profit from unauthorized charges when consumers don’t closely examine their monthly statements or assume the charges are legitimate.

The FTC complaint alleges that, through their companies, Miao and Bachman violated the FTC Act by deceiving consumers, leading them to believe they were obligated to pay for the text message services and unfairly billing consumers for services that they did not request.

Consumers allegedly received text messages with random factoids that were dismissed as spam without realizing they had received the messages through a paid subscription service they did not knowingly buy, according to the complaint. Miao and Bachman also used misleading website offers to obtain valid consumer phone numbers that were used to sign up consumers for their services without their knowledge.

The unauthorized charges continued to appear on consumers’ bills until the consumers noticed them and took action to unsubscribe. The charges, typically $9.99 per month, often appeared on consumers’ bills with an abbreviated or confusing form, and in many instances, consumers did not notice the slight variations in the amount of their bills from month to month.

For consumers who disputed the charges, the process of getting a refund was highly cumbersome and often unsuccessful. In some cases, consumers would reach representatives of the company who would promise refunds that never occurred. In other cases, consumers were able to get partial refunds from their phone company, but only for a limited number of months and sometimes far less than the length of time they were billed. The number of consumers who sought refunds from their phone companies was a high as 40 percent in some months and some carriers suspended Miao and Bachman’s companies from placing charges on their customers’ phone bills.

“This case puts another dent in the armor of scammers who use mobile cramming to take advantage of consumers across the country,” said Jessica Rich, Director of the FTC Bureau of Consumer Protection. “The FTC will continue working to protect consumers from unwanted third-party charges on their mobile phone bills.”

Companies: Tatto, Inc.; Bullroarer Corporation PTY, Ltd.; Shaboom Media, LLC; Tatto Media; Bune,LLC; Mobile Media Products, LLC; Chairman Ventures, LLC; Galactic Media, LLC; Virtus Media, LLC

News: ConsumerProtection FederalTradeCommissionNews