Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: Mobile cramming scheme shut down after bilking consumers out of $100M, (Jul 29, 2014)

By Greg Hammond, J.D.

At the request of the FTC, the federal district court in Los Angeles has issued a temporary restraining order against six companies involved in a mobile cramming scheme that placed over $100 million in unauthorized charges on consumers’ mobile phone bills. The Commission is seeking to permanently enjoin the operation and to recover money lost by consumers (FTC v. MDK Media Inc., File No. 132 3225, 132 3224, 132 3223, Case No. 2:14-cv-05099-JFW-SH).

According to the FTC’s complaint, MDK Media Inc., Tendenci Media LLC, Mindkontrol Industries LLC, Anacapa Media LLC, Bear Communications LLC, and Network One Commerce Inc. crammed charges onto consumers’ mobile phone bills in two ways: (1) by using deceptive website offers that led consumers to believe they were entering mobile phone numbers and personal information to receive free gifts or coupons, such as $1,000 Walmart or $500 Target gift cards; and (2) by sending unsolicited text messages to consumers with whom the companies already had prior contact. In addition, the Commission alleged that the companies misrepresented to wireless phone carriers that consumers knowingly subscribed to their text message subscription services—which included celebrity gossip alerts, “fun facts,” horoscopes, and others—and placement of Premium SMS charges on their phone bills.

Charges for the subscriptions typically cost consumers $9.99 or $14.99 per month, and renewed automatically. Many consumers were crammed for numerous months before noticing the charges, and had great difficulty in receiving refunds. In addition, the Commission alleged that two companies continued cramming charges under fictitious business names after they lost billing privileges through wireless carriers.

“This scheme demonstrates the kind of widespread harm that mobile phone cramming can inflict on American consumers,” stated FTC Bureau of Consumer Protection Jessica Rich. “It also shows why we’ve made it a priority to crack down on this problem.”

The temporary restraining order prohibits the companies from placing or assisting others in placing charges on consumers’ telephone bills, and temporarily freezes the companies’ assets. The Commission is also seeking permanent injunction against the companies, as well as relief for consumers, including “rescission and reformation of contracts, restitution, the refund of monies paid, and the disgorgement of ill-gotten monies.”

Companies: MDK Media Inc.; Tendenci Media LLC; Mindkontrol Industries LLC; Anacapa Media LLC; Bear Communications LLC; Network One Commerce Inc.

News: ConsumerProtection FederalTradeCommissionNews