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SMS marketing lesson: One bad apple can spoil the bunch

The United States Federal Trade Commission has singled out one bad actor that has allegedly been sending out tons of text messages to consumers that have not opted in. Will this hurt the vast majority of SMS marketers who play by the rules?

The FTC has filed an action in federal court seeking to shut down an operation that allegedly blasted consumers with millions of unlawful text messages and email messages without the recipients? consent. Many of the messages advertised a mortgage modification Web site called ?

?Over the years, Mobile Marketer has reported on a number of lawsuits involving unsolicited text messages,? said Gonzalo Mon, partner at Kelly Drye & Warren LLP, Washington. ?Most of those cases have dealt with instances in which legitimate companies promoting legitimate services have gotten in trouble, either because they were not aware of certain legal requirements or because they failed to interpret those requirements correctly.

?If the FTC?s allegations are correct, this case is very different in that the underlying operation and offer themselves were unlawful and deceptive,? he said. ?Although this case does once again illustrate the importance of getting consent before sending messages, the larger point is arguably the content of the messages sent by the defendant and the nature of the defendant?s campaign.

?Thus, the outcome of this case is unlikely to have a significant impact on legitimate mobile marketers that offer legitimate services to their customers.?

Isolated incident?
According to the complaint, the defendant behind the operation, Phillip A. Flora, sent millions of text messages, pitching loan modification assistance, debt relief and other services.

In one 40-day period, Mr. Flora sent more than 5.5 million spam text messages, a ?mind boggling? rate of about 85 per minute, every minute of every day. 

The complaint alleges four counts against Mr. Flora:

First, the FTC argues that sending unsolicited text messages to consumers causes monetary harm to those who are forced to pay for messages they did not want, and that this violates the FTC Act. 

Second, the FTC argues that the use of ?.gov? in the Web site URL, along with a U.S. flag on the landing page, falsely suggested that the Web site was affiliated with a government agency.

Third, the FTC argues that the failure to provide an opt-out mechanism in the emails violates the CAN SPAM Act.

Fourth, the FTC argues that the failure to include a valid physical postal address in the emails also violates CAN SPAM.

According to the FTC?s complaint, Mr. Flora collects information from consumers who respond to the text messages ? even those asking him to stop sending messages. He then sells their contact information to marketers claiming they are ?debt settlement leads.?

The FTC acknowledged the assistance it received from Verizon Wireless, AT&T and CTIA - The Wireless Association in this matter.

The commission?s complaint was filed in the U.S. District Court for the Central District of California.

Among other things, the FTC is asking the court to freeze the defendant?s assets while the case is pending.

Marketers and lawyers alike expressed shock that a company would so brazenly flaunt the rules and best-practice guidelines related to SMS and email marketing.

Rule No. 1: Always ask consumers to opt in before sending them a message. Marketers must have permission in advance before sending a text message to anyone.

?This is an extremely egregious case by someone who is clearly not a legitimate player, someone who clearly engaged in fraud,? said Ross Buntrock, attorney at Arent Fox LLP, Washington. ?I don?t think the FTC pursing this claim has any impact on legitimate SMS marketers?make sure that you get consumers to opt in to receive text messages.

?I definitely think that specifically with regard to SMS, the FTC is paying attention to mobile marketing, and on a related note, the FTC is going to be looking into free applications that lead into paid content,? he said. ?Mobile marketing of all stripes is coming under further scrutiny from the FTC and Congress, the SMS model is slowly losing favor in favor of application-based marketing models.

?All types of mobile marketing will be scrutinized as more and more people use their cell phones for every type of transaction and people try to reach them for marketing purposes?there will be scrutiny on every level.?

No tolerance for misbehavior
Adam Snukal, senior associate at Reed Smith LLP, New York, responding to an inquiry with the following statement:

The FTC's actions are consistent with the rigorous enforcement initiatives that are being undertaken on both a federal and state level within the financial services industry, and particularly with respect to mobile marketing. 

Between the FTC's near-zero tolerance for deceptive advertising of financially-regulated products and the recently created Consumer Financial Protection Bureau, mortgage companies, banks and other financial service firms must start to look inward at their advertising and marketing practices before it's too late. 

On the issue of mobile marketing, the takeaway is that text messages are being scrutinized, vetted and targeted as any other form of collateral or marketing and possibly even more so because of the personal nature inherent within mobile marketing. 

This trend is not unique to financial services, but to all industries and verticals.

Click here to view a copy of the FTC's complaint

Final Take
Dan Butcher, associate editor, Mobile Marketer