Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: Mobile cramming company settles FTC’s unauthorized billing charges, (Nov 21, 2013)

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

Text messaging services company Wise Media, LLC and its principals have settled FTC charges that they placed charges on consumers’ cell phone bills without their consent, a practice known as “cramming,” the FTC announced today (FTC v. Wise Media, LLC, FTC File No. 122 3182, Case No. 1:13-CV-1234). The case, first filed on April 16, was the FTC’s first against the practice of mobile phone “cramming.”

According to the FTC’s complaint, Wise Media would bill consumers for subscription services that sent the consumers text messages containing horoscopes, flirting tips, love advice, and similar information, even though the consumers did not authorize the purchase of the services. The company took advantage of a mechanism under which content providers can place charges on a specific mobile carrier’s phone bills through “short codes.” Wise Media would place the charges on mobile phone bills without following the “double opt-in” method generally employed for subscribing consumers to mobile services, the agency claimed, and would charge consumers even if they responded to its text messages by indicating that they did not want Wise Media’s services.

Many consumers would pay their telephone bills without noticing the added charges. Consumers who did dispute the charges would have trouble determining that Wise Media was behind the charges, and if they did manage to contact Wise Media they would often be told that they would receive refunds that never materialized. Brian M. Buckley and Winston J. Deloney allegedly controlled Wise Media’s operations, and transferred hundreds of thousands of dollars from Wise Media to relief defendant Concrete Marketing Research, LLC.

The complaint alleged that Wise Media and its principals violated Section 5 of the FTC Act by misrepresenting that consumers were obligated to pay for the charges it placed on their phone bills and by billing consumers without their prior express consent. Relief defendant Concrete Marketing Research allegedly had no legitimate claim to the funds transferred to it from Wise Media.

Under the terms of the FTC’s stipulated order with Buckley and Wise Media, the defendants are barred from placing any charges on telephone bills and from billing consumers for goods or services without the consumers’ awareness or express consent. The order also includes a monetary judgment of $10,965,638 against the defendants jointly and severally. The judgment will be partially suspended due to the defendants’ inability to pay, but Buckley will be required to surrender all of Wise Media’s remaining assets and nearly all of his assets, including sums in various bank accounts, five vehicles, a watch, and 110,000 shares in Kiz Studios, Inc., for a total in excess of $500,000.

The stipulated order with Deloney and Concrete Marketing Research similarly bars them from placing any charges on telephone bills and from billing consumers for goods or services without the consumers’ awareness or express consent. It also imposes a $175,817 monetary judgment on the defendants.

Both sets of defendants are prohibited from benefitting from customer information acquired through the operation, must destroy such information within 30 days of being directed to do so, and must cooperate with any future FTC investigation.

Companies: Wise Media, LLC; Concrete Marketing Research, LLC

News: ConsumerProtection FederalTradeCommissionNews