Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: Mobile cramming operators agree to $150 million judgment in FTC settlement, (Jun 13, 2014)

By Greg Hammond, J.D.

Operators of a gigantic mobile cramming scheme, including two individuals and eight companies, have agreed to a $150 million monetary judgment in settlement of charges they violated the FTC Act, the Commission announced today.

According to the FTC’s complaint, which was filed in December 2013, Lin Miao and various corporate defendants allegedly operated a scam in which they billed consumers for text message-based subscription services, even though consumers had not authorized any purchase of those services. The text message services included “love tips,” “fun facts,” and celebrity gossip alerts, and monthly charges were typically $9.99. The Commission alleged that many consumers paid their mobile bills without noticing the charges or, if they did notice them, were unsuccessful in disputing or receiving a refund for the unauthorized third-party charges. According to the FTC, Miao and other corporate defendants received a substantial percentage of the unauthorized charges and have made millions of dollars.

“Cramming unauthorized charges on consumers’ phone bills is unlawful, and this settlement shows the FTC is committed to making sure that anyone who does it won’t be able to keep their ill-gotten gains,” stated FTC Bureau of Consumer Protection Director Jessica Rich. “Consumers have the right to know what they are being charged.”

The settlement agreement permanently prohibits Miao and the corporate defendants from billing or causing a consumer to be billed for any product or service, without the consumer’s express informed consent and without having established and maintained a record of such consent. In addition, the defendants will be effectively barred from placing any charges on a consumer’s telephone bill and from making any misrepresentations concerning any product or service, or a consumer’s obligation to pay for charges for any product or service.

The monetary judgment of $150 million will be partially suspended, due to Miao’s inability to pay the full amount. Nevertheless, he will be required to surrender over $10 million in assets to the FTC, including the contents of 14 bank accounts, one life insurance policy, five real estate properties, four vehicles, and various items of jewelry.

The Commission approved the proposed stipulated order with a vote of 5-0.

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

News: ConsumerProtection FederalTradeCommissionNews