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Mobile Messenger to pay $12M for unauthorized content charges

Wireless subscribers who received unauthorized mobile content charges will be awarded restitution by aggregator Mobile Messenger Americas Inc., as per a class-action settlement approved by the United States District Court of Florida.

The lawsuit was initially filed in December of 2007 by Lisa Gray individually and on behalf of a class of similarly situated individuals. The plaintiff claimed that Mobile Messenger's practices resulted in unauthorized charges on her wireless bill and she demanded recovery of the charges.

"With this settlement, Mobile Messenger demonstrated leadership in the aggregator space by taking care of its customers," said Myles McGuire, Chicago-based partner at the KamberEdelson LLC law firm.

"Unlike other aggregators who are resisting attempts from consumers to collect damages from mobile content services they didn't authorize, Mobile Messenger has agreed to take steps to prevent this type of thing from happening in the future."

In the past couple of years several class actions have been filed by consumers challenging the "cramming" practices in the mobile content industry.

Cramming is the result of systematic flaws in billing systems that arose becase of the rapid and largely unplanned growth of the mobile content industry.

Mobile Messenger does have consumer protection protocols in place, but the plaintiffs allege that its billing and collection systems lack sufficient checks or safeguards to prevent unauthorized charges from being added to customers' bills from their wireless service provides.

In an effort to show its cooperation, Mobile Messenger decided to settle the lawsuit out of court, by paying $12 million in restitution.

The settlement will receive final approval in December.

Unauthorized content charges seem to be a problem these days.

In fact AT&T Mobility just reached an undisclosed settlement in May. The company allegedly allowed third-party mobile content providers to place charges on its customers' bills for unauthorized premium mobile content.

Additionally, the plaintiffs in this case claim that AT&T Mobility simultaneously benefited from and neglected to act aggressively enough to prevent it.

"If you're an AT&T customer and you were charged for content originating with Mobile Messenger, you'd be eligible to participate in either settlement -- but not both," Mr. McGuire said. "They have overlapping claims, so if they are refunded in whole from one settlement, they shouldn't be able to collect twice."

Mobile Messenger has denied any wrongful conduct.

Mobile content refers to products such as ringtones, games, graphics, news and other alerts that generally are received via text message on mobile phones and are charged directly to customers' phone bills.

Although a relatively new form of commerce, mobile content has evolved to form a large and increasingly important industry.

Mobile Messenger acts as an intermediary between content providers, marketers and carriers, providing clients with advice on consumer protection, billing and payments, and direct customer support for users buying mobile content through its system.

Attorneys Jay Edelson, Mr. McGuire and Ryan Andrews of KamberEdelson were appointed by the court to serve as the attorneys for the case.

Class members are encouraged to visit to learn more details about the settlement and how to apply for refunds.

This settlement is expected to put a lot of pressure on others to follow Mobile Messenger's lead.

"All the other carriers are dealing with similar issues, since they are the point of contact with consumers and they are first to receive the money in the value chain," Mr. McGuire said. "The mobile phone industry is a pretty extensive value chain, with a lot of different industries and micro industries within it, from carriers and manufacturers to aggregators, marketers and copyright owners."

Network infrastructure provider Verisign, which owns mobile content provider m-Qube and mBlox are two large aggregators who will be affected by Mobile Messenger's and AT&T Mobility's settlements.

"Aggregators are aware of these settlements and they have similar issues, so we expect this to become a model for other aggregators," Mr. McGuire said.

These settlements could have an impact on the industry as a whole.

"In the short term it means that a fund is being set up so that consumers can get their money back for unauthorized payments for mobile content services," Mr. McGuire said. "Mobility is a very exciting industry, it's growing very quickly and in time it's going to be much larger than it is today.

"In the future, applications for mobile content will be limitless and there's a growing consensus that payment systems need to verify each consumer's consent to bill on cell phones," he said. "If you're going to be essentially using a cell phone as a credit card, where carriers are collecting money on behalf of third parties and remitting, they are basically acting as banks."

The message of these settlements are that if private companies don't resolve these issues themselves, then the government will step in to protect consumers.

"If the industry doesn't take care of this, legislation will and I think that message is getting out," Mr. McGuire said. "Carriers and aggregators need a system that functions adequately for determining consumers' consent for making mobile purchases.

"Unless companies find a technological solution, this will be revisited on a larger scale in three, four or five years because of the growth of the industry," he said.