FTC opens new front in the War on Commercial Texting

Davis Dwight & Tremaine LLP
Oregon business law firm
Ronald G. London

The Federal Trade Commission (FTC) recently announced it concurrently filed eight complaints in courts around the United States against “senders of spam text messages” who allegedly engaged in deceptive acts or practices by promoting supposedly free gift cards.  The complaints constitute what the FTC called a “crackdown” on affiliate marketers who allegedly “bombard consumers with hundreds of millions of unwanted spam text[s],” in order to steer them to allegedly deceptive websites promoting the cards.

While the conduct alleged by the FTC details the kind of gambit that often draws the agency’s wrath, the cases are also notable because they allege that merely sending unsolicited commercial texts can be an “unfair practice” under the Federal Trade Commission Act.  As texting is already heavily regulated by the Federal Communications Commission (FCC) under the Telephone Consumer Protection Act (TCPA), which also allows private causes of action, including class actions, the FTC’s apparent position seems to up the ante for senders of commercial texts.

The FTC’s deceptive “spam text” complaints collectively charged 29 defendants with sending a combined 180 million-plus unsolicited texts promising free gifts or prizes – including gift cards worth $1,000 at major retailers – to millions of consumers, many of whom, the FTC underscored, had to pay to receive the texts.  The FTC alleged the texts had links that led to a “confusing and elaborate” online process that required recipients to provide sensitive personal information, apply for credit, or pay to subscribe to services to get the supposedly free cards.  Upon providing their information, consumers allegedly were directed to another site and only at that point told that, to receive the gift cards, they would have to accept a number of “offers” – which could include recurring subscriptions charged to credit cards, and/or applications for credit – with the number necessary to proceed  sometimes totaling a dozen or more.  And even if consumers completed the offers, they were notified they had to find three others who also would complete offers before they would receive any gift card.

The FTC also alleged the landing sites collected a great deal of personal information – including health information, in some instances – before allowing consumers to continue, in many cases claiming the information was necessary to ship the gift cards.  In truth, the FTC alleged, the information was sold to third parties for marketing purposes, making the claims about the need to collect the information deceptive.

In those regards, the FTC’s approach was consistent with its typical unfair and deceptive trade practice enforcement.  But each of the eight complaints also includes a count that alleges:

[The] practice of procuring … the transmission of unauthorized or unsolicited commercial electronic text messages to the mobile telephones and other wireless devices of consumers … has caused or is likely to cause substantial injury to consumers that consumers cannot reasonably avoid themselves and that is not outweighed by countervailing benefits to consumers or competition[, which] … is unfair and violates Section 5 of the FTC Act.

In other words, it seems, procuring someone to send “unauthorized or unsolicited … text[s]” can itself be an unfair trade practice.  While this might just be an additional way of otherwise trying to get at the bad actors in these cases, one can’t help but wonder how far the notion of unsolicited texts as unfair trade practice might be taken.

To that end, the FTC announcement of its enforcement actions stressed that the defendants sent text messages to random phone numbers, including, in up to 12% of cases, to consumers who do not have a text message subscription plan, the implication being that the recipients incurred costs to which they did not agreed.  That is precisely the harm against which other laws regulating text messaging are designed to protect.

Indeed, the TCPA, as administered by the FCC (and interpreted by the courts)  makes it unlawful to send text messages to mobile phones without prior express consent.  And, as detailed in our entries last fall and spring, the FCC recently raised the consent bar for text messages that are “telemarketing” or “telephone solicitation” (i.e., those that are part of a plan, program or campaign to sell goods/services) to the more demanding and specific prior written, signed consent standard.  Significantly, the text messages encompassed in the FTC’s crackdown would all seem to be solicitation, and as the FTC describes them, were not sent with any prior consent of the recipients (written and signed, or otherwise).  That would seem to make them unlawful under the TCPA as well.

In the past, the FTC largely has left failures to acquire consent for texts to TCPA enforcement, and had even informally indicated it would not apply its telemarketing sales rule (TSR) to texts, only to voice calls.  Yet in the fall of 2011, as we flagged, the FTC targeted unsolicited texts, and now it has again.

Meanwhile, the TCPA allows those who receive text messages to which they did not consent (and other TCPA-violative calls) to sue the senders, and provides for statutory damages of $500 – $1,500 if the texts were sent “willfully” (which the FCC and courts tend to find fairly easily).  This has encouraged a healthy TCPA plaintiff’s bar, which of late has led to significant TCPA class action activity.  In fact, depending on how one looks at it, and the source relied upon, TCPA actions are up anywhere from 50% to 80% over the past year.  And these claims can lead to settlements in the double-digit millions of dollars if efforts to have them dismissed fail.

Adding the implications of the additional unsolicited-text-message counts in the FTC’s spam-text gift card complaints, it appears senders of commercial texts must potentially concern themselves with the FCC, the TCPA plaintiff’s bar and, now, the FTC.  Together, these enforcement sources provide ample reason to be scrupulously careful about sending commercial texts only where the necessary consent is present.

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