One Reputable Retailer Takes a $7M Hit On Text Messages

Posted on October 31, 2008 by Kristen J. Mathews

On September 10, 2008, Timberland Company, an outdoor clothing and shoe merchant, along with co-defendant ad agencies GSI Commerce Inc. (“GSI”) and AirIt2Me Inc. (“AirIt2Me”), settled charges brought under the Telephone Consumer Protection Act (“TCPA”) arising from unsolicited text messages advertising Timberland’s holiday sale.  Pursuant to the settlement, Timberland must employ best practices in future marketing, and must pay $7 million into a fund for distribution to the class.  Prior to any future mobile marketing campaign, GSI agreed to circulate to its marketing personnel a copy of the Mobile Marketing Association’s Consumer Best Practices guidelines, and to establish meaningful training and compliance checks in connection with those guidelines. Additionally, the defendants must pay class counsel a maximum amount of $1,750,000.  The settlement has been agreed to by all parties, but is still subject to final approval by the court.
 

The event underlying the action was a mobile marketing campaign.  The plaintiffs alleged that Timberland contracted with AirIt2Me and GSI for the promotion of a holiday sale in 2005.  As a part of the promotion, Timberland, by and through these agents, allegedly sent thousands of unsolicited SMS text messages to potential customers' cell phones.  Two recipients of the text message initiated a class action alleging violation of the TCPA, which prohibits unsolicited voice and text calls to cell phones, using an auto-dialing system, unless the recipient has given prior consent.  The statute also prohibits companies from initiating telephone solicitations to individuals on the national Do-Not-Call list, unless the individual has given prior express consent or has an established business relationship with the company.


Any company engaging in a mobile marketing campaign should utilize a strategy that meets its business objectives, but also takes the appropriate steps to protect itself from potential liability under the applicable laws.  In the case of text messages, a company must obtain an “opt-in” to send messages to a mobile device.  This settlement illustrates the high pay-outs that can result from legal actions.  Violations of the TCPA can result in statutory damages of $500 per violation (i.e., for each individual text message).


When undertaking these types of campaigns, companies must comply with both the TCPA and the Controlling the Assault of Non-Solicited Pornography and Marketing Act (“CAN-SPAM”), as well as the various state laws that apply to mobile promotional messaging.  All of these laws require companies to obtain express consent from individuals before sending promotional messages to their wireless devices.  In addition to these statutes, both the Mobile Marketing Association and the Wireless Association have best practice guidelines to provide companies with guidance in crafting marketing policies.  Companies should review their mobile marketing policies to ensure they are compliant, and should distribute these policies to all applicable employees and agents.  In addition, when utilizing any third-party agent to facilitate mobile marketing campaigns, a company should require that the agent is complying fully with the applicable laws and regulations.  Any contracts with third-parties should include warranties and indemnification as to these requirements.
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Emerging Standards For Mobile Marketing

Posted on June 10, 2008 by Kristen J. Mathews
Many B2C companies are beginning to explore marketing to consumers’ wireless devices using text messaging (“SMS,” or “short message service”) and MMS messaging (“Multi-media Messaging Service”). They may even target their promotions based on where the recipient is physically located using the wireless device’s GPS technology. They also may target their promotions to teens and tweens. What legal issues should companies be aware of as they navigate through this relatively new area?
This question is very timely, as mobile marketing has received a lot of attention from regulators and industry organizations in the last few months.

Statutes. Statutorily, we have two federal laws that apply to mobile messaging: the Telephone Consumer Protection Act (the “TCPA”) and the Controlling the Assault of Non-Solicited Pornography and Marketing Act (the “CAN-SPAM Act”). Each of these laws apply to mobile promotional messaging, depending on the technology used to send the messages. We also have a host of state laws that apply, either expressly or implicitly, to mobile promotional messaging. In summary, the laws require that companies obtain express consent from individuals before sending promotional messages to their wireless devices. In some cases, specific consent language is required.

Mobile Marketing Association Guidelines. In addition to statutes, we also have various industry standards that apply to text messaging campaigns. The Mobile Marketing Association (MMA), for example, has a set of Consumer Best Practices Guidelines for mobile marketing, which is incorporated by reference into the carrier agreements under which short codes are issued by carriers to companies that want to launch text messaging campaigns. These best practices provide, among other things, requirements for consumer notices, consent and opt-out rights.
 
Wireless Association Standards for Location-based Marketing. The CTIA (The Wireless Association) recently issued a set of best practices that provide for, among other things, consumer notice and consent for location-based marketing, and consumer choice for sharing of location information with third parties. These guidelines also address retention and security of location-based information, abuse reporting and public self-certification of compliance with the best practices. (Self-certification, in itself, presents its own set of legal issues.)
 
Federal Trade Commission. Just this past May, the Federal Trade Commission (FTC) hosted a public town hall meeting, “Beyond Voice: Mapping the Mobile Marketplace.” Topics discussed included the evolution and future of mobile marketing, location-based marketing, consumer disclosures and consents, the challenges of small PDA screens for consumer notifications, teen and tween-targeted campaigns, parental controls and security issues with respect to data stored on mobile devices. Also in May, two consumer advocacy groups (the Center for Digital Democracy and the U.S. Public Interest Research Group) announced their plan to file a complaint with the FTC, asking it to examine behavioral advertising via mobile devices and to promulgate special rules regulating mobile marketing to children and teens.
 
It is reasonable to anticipate that the FTC will ultimately issue either guidelines or rules which apply to mobile marketing campaigns, in an attempt to set forth uniform requirements for mobile marketing. Until then, companies must navigate and synthesize the various sources of applicable laws and standards, and derive an approach that meets their business objective while avoiding backlash from the media, the industry, the wireless carriers and consumers.
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