Wednesday, November 6, 2013

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Attorney General Abbott Files Mobile Phone ‘Cramming’ Case

AUSTIN – Texas Attorney General Greg Abbott today filed an enforcement action charging four text-messaging content providers and their billing aggregator, Mobile Messenger U.S. Inc., with unlawful cellphone “cramming.”

According to the State’s legal action, the defendants enroll customers in premium text messaging services programs, fail to properly disclose the costs associated with those services, and then bill the customers without their consent. The deceptive services purportedly offered by defendants include ringtones, horoscopes, celebrity gossip news and various discount coupons.

Today’s enforcement action named four affiliated premium short-messaging services content providers – Bear Communications LLC, MDK Media Inc., Anacapa Media LLC and Tendenci Media LLC. The petition also named billing aggregator Mobile Messenger U.S. Inc., a California entity that serves as middleman between the content provider and wireless cellphone carriers. Also named is defendant Mundo Media Ltd. of Canada, a paid third-party advertising network that drives cellphone users to the content providers’ offers.

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Attorney General's lawsuit against Mobile Messenger U.S. Inc. and others

While wireless carriers do not usually interact directly with content providers, they do enter into contracts with aggregators and provide the aggregators with access to the carriers’ billing infrastructure. This provides the aggregator with the ability to submit charges on behalf of its content provider clients and have those charges appear directly on a customer’s mobile phone bill.

As part of the aggregator’s contractual relationship with wireless carriers, one of the aggregator’s responsibilities is to verify and ensure that all premium text messaging charges the aggregator submits on behalf of its content providers were obtained legally and in compliance with industry guidelines. Typically, to be in compliance with recognized guidelines, content providers must obtain a customer’s consent to charges through a two-step process known as “double opt-in” verification that includes clear disclosures and an agreement to be billed for messaging services. The guidelines detail how and where certain disclosures must be made in advertisements and during the double opt-in process.

According to the State’s enforcement action, however, the content providers – with the help of aggregator Mobile Messenger, and their advertising network, Mundo Media – used deceptive websites to trick customers into entering their mobile phone number and a personal identification number. Despite the websites’ failure to make any meaningful disclosures and follow industry guidelines, the defendants treated customers’ actions as consent to be billed – even though most customers never intended to enroll in defendants’ services. The State charged that Mobile Messenger – which was in the best position to detect and prevent the content providers’ deceptive conduct – instead took deliberate steps to help the content providers continue their deceptive conduct and avoid detection by the wireless carriers.