Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: Mobile marketing company settles FTC misrepresentation and unfair billing charges, (Aug 21, 2013)

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

Jesta Digital, LLC, also doing business as Jamster, has settled FTC charges that it made misrepresentations in connection with the marketing of a purported virus protection program, and engaged in unfair billing practices (FTC v. Jesta Digital, LLC, FTC File No. 112 3187, Case No. 1:13-cv-01272).

According to the FTC’s complaint, Jesta placed banner ads that consumers would see when playing the Angry Birds game on devices running the Android operating system. The ads contained a robot image similar to the Android logo, and falsely claimed that viruses had been detected on consumers’ devices.

Clicking on the banner ads would bring up an advertisement for a virus protection program. Clicking on that page would bring up a page containing a “Subscribe” button. Although that screen contained the phrase “Click to Get 20 downloads for $9.99/mo.,” the FTC alleged that the rest of the advertisement suggested the offer concerned a mobile antivirus program.

Clicking on the Subscribe button or elsewhere on the screen would cause Jesta to bill consumers $9.99 each month through a technology called Wireless Application Protocol, or “WAP,” billing. This technology would capture a consumer’s phone number through the subscriber identity module or “SIM” card in the consumer’s mobile device, and cause charges to be placed on consumers’ mobile device bills. Jesta would allegedly charge consumers for ringtones and other products that they did not order.

Consumers that attempted to download Jesta’s antivirus software were typically unable to do so, according to the complaint. The complaint cites an internal Jesta e-mail that stated that only 372 of 100,000 subscribers received a download link they could use to get the software. The complaint also cites an internal e-mail from the Vice President of Global Marketing Operations to the Director of Global Marketing stating that the Chief Marketing Officer was “anxious to move our business out of being a scam and more into a valued service.” Jesta’s practices allegedly resulted in a high level of refund requests.

The complaint asserted that Jesta’s conduct violated Section 5(a) of the FTC Act by misrepresenting that viruses had been detected, by misrepresenting that an antivirus program would be provided to purchasers, by failing to disclose the true nature and cost of the service, by engaging in unauthorized billing practices, and by misrepresenting that consumers were obligated to pay for goods and services charged to their mobile device accounts.

Under the terms of the proposed settlement, Jesta is prohibited from misrepresenting that it has detected viruses, that it will provide antivirus software, the cost of any goods or services, any material conditions on purchasing or receiving any goods or services, any material aspects of the central characteristics of any goods or services, or any material aspects of a refund policy. Jesta also cannot use WAP billing “without first providing at least two ‘buy,’ ‘subscribe,’ ‘purchase,’ or substantially similar buttons or links on separate Landing Pages or screens that are the sole buttons or links that the consumer must click in seriatim to order, subscribe to, pay for, or accept charges for any good or service.”

In addition, Jesta cannot bill a customer without providing obtaining express verifiable authorization from the customer. Jesta must also make a variety of disclosures concerning its goods and services, billing, fees, conditions, and refund policies, and must notify consumers of Jesta’s charges after they give authorization for them, prior to renewal of Jesta’s services, and to the extent possible, on phone bills in which Jesta’s charges are included.

Jesta is required to make full and automatic refunds to consumers who were billed between December 8, 2011, and the date of the entry of the order for any good or service that involved a claim that a consumer’s device was infected with malware or that Jesta would provide software to protect consumers from malware. For consumers initially billed or charged using WAP billing under short code 75555 from August 1, 2011, until December 7, 2011, Jesta must notify the consumers of their right to a refund, and must provide a refund to all consumers who did not use Jesta’s service or incurred the charges when under age 18.

Finally, the settlement requires Jesta to make a $1.2 million payment to the FTC. The settlement also provides for compliance reporting and monitoring.

Companies: Jesta Digital, LLC

News: ConsumerProtection Advertising FederalTradeCommissionNews