Monday, June 7, 2010

Overcoming legal hurdles of mobile marketing

Overcoming legal hurdles of mobile marketing


Three of the greatest challenges to mobile marketing are the permission-based nature, the lack of space for disclosures and the absence of uniform national regulation that considers the nature of the medium, according to attorneys who are experts in the field.

Mobile is different from any other form of marketing because it requires express consent, or opt-in, from consumers to be able to contact them. Other forms of marketing such as email or telemarketing only require that consumers have the option to opt out.

“Express consent is exactly just that – an affirmative statement that clearly consents to the communication from the entity sending the message – and broad consents or reliance on an existing business relationship have not been recognized as sufficient consent,” said Andy Lustigman, principal attorney at The Lustigman Firm, New York.

“The express consent requirement continues to trip up legitimate marketers who are subjected to class action lawsuits with enormous financial exposure for violation of these laws for engaging in what otherwise is legitimate marketing behavior,” he said.

For example, in the beginning of April, the United States District Court for the Northern District of Illinois’ Eastern Division found that a Twentieth Century Fox SMS campaign violated the Telephone Consumer Protection Act for sending SMS to consumers without their express consent (see story).

Andrew Lustigman

Andrew B. Lustigman is principal at The Lustigman Firm

According to Gonzalo Mon, an attorney in Kelley Drye & Warren’s advertising and marketing law practice in Washington, there have been a number of lawsuits against companies that sent text messages to consumers without their consent.

All of the cases have turned out the same way.

The courts have essentially determined that: (a) text messages are subject to the Telephone Consumer Protection Act, even though that law was enacted long before the advent of SMS; and (b) the law requires that companies obtain consent before they send text messages.

Gonzalo Mon

Gonzalo Mon is an attorney at Kelley Drye & Warren law firm

“The bottom line is that marketers need to understand that, unlike email marketing, mobile marketing requires opt-in consent,” Mr. Mon said. “Marketers should consult the MMA Guidelines for tips on how to get consent.”

Mr. Lustigman said that when contacting consumers via mobile, a marketer must independently determine that the permission-basis for the contact encompasses the specific communication that the marketer intends to transmit.

It is a huge mistake to just rely on a vendor which represents that this is an “opt-in” list without otherwise determining how the permission was obtained to reasonably confirm that the consumer knew he or she was giving permission and whether the permission expressly contemplates the contact by the marketer.

Also, there is enormous financial risk involved in contacting consumers via mobile without sufficient permission.

“Remember, a vendor’s representation and warranty is only as good as the financial viability of the vendor,” Mr. Lustigman said. “In addition, be sure to document your due diligence efforts and preserve the basis of the consent should the consent ever be questioned.”

Mr. Lustigman said that another challenge in mobile marketing is the lack of space on a screen even though the traditional rules of advertising and promotional marketing law apply.

Unlike accessing the Internet on a personal computer – where there is a tremendous amount of space for disclosures – mobile marketing real estate is tiny because of the small screen.

For example, it is very popular now to run promotions on Twitter. However, Twitter only provides 140 characters for the entire statement.

Mr. Lustigman suggests marketers use and similar hyperlinks to provide the requisite disclosures, and be sure that the text leading to the hyperlink reasonably indicates to a consumer as to the subject matter of the contents.

Moreover, given the limited space, marketers need to make sure that the disclosures that are provided are clear and to the point.

“Another challenge is that most of the enforcement regarding mobile marketers has been by private class action litigation and not governmental enforcement,” Mr. Lustigman said. “Private litigation initiated by class action plaintiff’s attorneys is not an effective way to develop a fair and balanced regulatory structure.”

Premium charges
Premium charges are another challenge.

Consumers are likely to complain when they are surprised by premium charges on their phone bills, and these complaints are likely to lead to regulatory investigations.

Over the past few years, the Florida attorney general has put pressure on AT&T and Verizon Wireless to more closely monitor how premium charges are advertised.

To settle the investigations, both carriers agreed to include provisions in their contracts with mobile marketers in which the marketers agree to make specific disclosures in a specific way (see story).

“Marketers should pay attention to these settlements and make sure they comply with the disclosure requirements,” Kelley Drye's Mr. Mon said.

Mobile sweepstakes
There are some legal hurdles when it comes to mobile sweepstakes.

Per Mr. Mon, it is generally unlawful to require people to pay money to enter a sweepstakes.

As text-to-win promotions have become more popular, there has been an increased focus on whether a requirement that a consumer pay a text message fee is unlawful.

“Marketers should make sure that they include a method of entry that does not require the payment of any fees,” Mr. Mon said. “Even then, marketers should be cautious before charging premium text message fees in a sweepstakes.

“There are currently some high-profile class actions pending against text-to-win sweepstakes with premium fees," he said. "Marketers should consult with their legal counsel to determine what is possible in this area.”

Although privacy has not been in the forefront of mobile marketing, that may soon change.

The Congressional draft bill has potentially sweeping repercussions for mobile marketing. Industry experts fear if the bill is passed users may be required to opt-in to all forms of targeted mobile marketing (see story).

Additionally, if the bill is enacted, mobile marketers would likely be obligated to display a privacy policy describing their information collection and use practices prior to the collection of certain information.

“And, if a mobile marketer utilizes an unaffiliated third party to implement its campaign – as many marketers do – disclosure to that third party would require a consumer’s opt-in consent,” Mr. Mon said. “Marketers should pay close attention as Congress debates the bill.”

Even though mobile is a new channel, traditional rules of advertising still apply, in addition to specific laws which may directly encompass mobile marketing.

Mobile is still evolving and therefore old laws for older mediums such as online are being applied.

“Therefore, what may be considered a legitimate practice today, may not be considered legitimate in the not so distant future,” Mr. Lustigman said.

Senior Editor Giselle Tsirulnik covers advertising, messaging, legal/privacy and database/CRM. Reach her at

Stan Davis of Exposure Elements post this and many other articles on this blog to further the mobile marketing education of our readers. Exposure Elements is a Silicon Valley Property Exposure company. We offer a complete range of SMS Mobile Marketing solutions for all California businesses. We extend the capabilities of the common virtual tour with high defininition (HD), high dynamic range (HDR) property photography for the most realistic images in any virtual tour. We offer print and distribution services to compliment our two core services.

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