FTC Text Spam Enforcement on the Rise

The FTC’s actions serve as a powerful reminder that companies engaging with consumers via text messages should take care to ensure that their practices comply with the web of federal and state outbound calling and texting laws.

The complaints invoke the FTC’s authority under Section 5 of the FTC Act, charging defendants with both deceptive marketing practices and unfair trade practices. While the FTC’s complaints vary in their particulars, each asserts that the millions of text messages at issue represented that the recipient was entitled to receive a free gift or prize by clicking on a link in the text, even though recipients typically had to do far more than click on the link to receive the gift or prize. For example, in its suit against Ecommerce Merchants LLC and its officers, the FTC alleges that a recipient who clicked on the link had to participate in multiple other offers to receive the free item. Moreover, in most cases the users had to provide payment, extensive personal information, or other customer referrals in order to qualify for the “free” card. As a result, the FTC alleges that the company’s actions were deceptive insofar as items were not truly “free” and the company did not disclose the material terms and conditions of its offers. The FTC also alleges that the practices were unfair because most of the text messages were sent to users who did not consent to receive marketing text messages from the defendants. For example, the FTC alleges that defendant Ecommerce Merchants sent at least 30 million unsolicited text messages in the past year, and that the company did not always honor opt-out requests.

The complaints seek entry of a permanent injunction preventing future violations of the FTC Act, and potential monetary relief in the form of restitution, refund of monies paid by consumers to the defendants, and disgorgement of defendants’ profits.

In addition to enforcement by the FTC, text message spam could also violate the Telephone Consumer Protection Act, 47 U.S.C. § 227, and the mobile e-mail provisions of the CAN-SPAM Act, 15 U.S.C. § 7701 et seq., both of which are enforced by the FCC. Interestingly, the FTC did not specifically invoke its Telemarketing Sales Rule, 16 C.F.R. Part 310, in the complaints.

Aside from announcing the lawsuits, the FTC also posted a blog entry aimed at educating consumers about text message spam. The blog post notes that the FTC has received tens of thousands of complaints about unsolicited text messages.

Paul Otto, an associate in our Washington office, contributed to this entry.

Authored by Michelle Kisloff and Mark Brennan