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Mobile Marketing Raises Novel Legal Issues Print E-mail

June 2009

For more information contact Jim Kaminski at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it This e-mail address is being protected from spam bots, you need JavaScript enabled to view it   or 202-293-8975.

he mobile marketing industry is exploding.  More and more, clever marketers are learning to adapt the technology to effectively promote their goods and services.  SMS coupons, text-to-win sweepstakes entries and other ad-supported mobile applications (i.e., iPhone applications store, mobile games) are already becoming an everyday occurrence.  As John Schmidt of Mobients Inc., an innovator in cell phone software development commented:  “The flood gates have opened and marketing campaigns in this area are accelerating at rocket speed.”

The law often lags behind emerging technologies.  In some respects, this lag is good because it reduces the likelihood the law will chill or limit technology developments.  But, it is notoriously difficult to pinpoint when regulators will decide to step in to lock down these technologies. 

Companies may also incur liability from their employee’s abuse of a mobile device

Mobile marketing law is still in its infancy.  As a result, the best approach for controlling the risks of mobile marketing campaigns is to focus on the following three aspects: 1) since consumers incur fees for text messages, how do you ensure you have appropriately disclosed and given consumers control over the flow of texts; 2) minimize consumer information that is utilized or captured during the campaign to only that information that is necessary to complete the campaign; and 3) consider how to overcome legal disclosure requirements due to the space limitations inherent in text messages or, in the case of mobile marketing campaigns utilizing the mobile web, on the small screen of a mobile device.

Since consumers are charged for individual text messages, it is of paramount importance to ensure that there is proper disclosure of and control over the flow of text messages so that you do not unfairly incur expenses for consumers just in an attempt to market to them.  Courts and regulators alike have never demonstrated tolerance for marketers that cost consumers money just for the privilege of being marketed to, and are quick to charge the marketer with being unfair.  Accordingly, it is prudent to make sure that phone users opt in, or agree, to receive commercial text messages.

Few people read the user agreement on a Website or program before clicking, “I agree,”

Remember that in contrast to senders of email messages who can mask their identity, the original sender of a mobile phone text message cannot be disguised. Many businesses do hire third party “gateway” companies to send the commercial text messages to the opt-in phone users in their databases. However, if the gateway companies fail to honor the opt-in requirement, or are at least perceived to be doing poorly in this regard, mobile carriers may block the marketers from sending any messages in addition to the gateway company.  The mobile carriers will shoot first and ask questions later.  It can be difficult to convince a mobile carrier that violation of opt-in preferences was a one-time error. As of yet, no well-defined process exists for appealing such an action.  A business may need to sue the gateway to recover damages.

As mentioned, tailoring the amount of information that is collected from consumers in mobile marketing campaigns and restricting, as much as possible, the amount of information that is actually stored on their mobile device is another important aspect of controlling the risk of mobile marketing campaigns.  Many mobile phone subscribers now use smart phones, which offer more computer functions than less-advanced phone models. If these phones fall into the wrong hands, whether they are lost, stolen or recycled, the consequences can be disastrous. Lose a personal phone and credit card information, personal data, and contact lists may be subject to potential abuse. Credit card fraud, identity theft, and other problems may also result. Lose a smart phone that has been used to receive any business information or is provided by a company to an employee for business use, and any sensitive, even proprietary, business material on that phone is no longer secure. Some smart phones have a remote kill function that enables you to deactivate the device. Hackers, however, can find ways to get through anyway.  As a legal protection when providing smart phones to employees, corporations may wish to tell the employees explicitly that they are not allowed to have any proprietary company information on the phones. In that manner, companies may attempt to avoid liability should information be leaked.

Companies may also incur liability from their employee’s abuse of a mobile device.  Harassing anyone with repeated text messages may constitute stalking or bullying. In any case, companies that provide mobile devices to their employees should have policies in place prohibiting such abuse. This step can protect the company should a complaint be filed. Further, it may be possible to work with the wireless carrier to block certain numbers and texting functionality, if requested.  

Few people read the user agreement on a Website or program before clicking, “I agree,” and moving forward and because so few people read these agreements, there is some debate around whether users can be held to their terms. Satisfying the requirement to gain user consent on a mobile phone is even more challenging due to the space limitations of mobile devices.  Marketers should examine whether they are willing to accept risk resulting from a lack of knowing consent.  For example, if there is question as to whether a phone user has granted permission for his or her photo to be used for promotional purposes, the photo should not be used.  Otherwise, there is a risk that a company will at least lose that customer or even face a lawsuit.

Users may also be surprised to find other extra charges on their mobile phone bills.  Even if they knowingly purchase a special ring tone or wallpaper, for example, the charge may be higher than they expected. They may not have realized, for example, that introductory prices will revert to higher prices. Currently, most mobile phone carriers in the United States readily adjust the price when a subscriber challenges the bill. However, to avoid the threat of a government or private lawsuit, marketers should explain their pricing clearly.

Text marketing to children may create additional problems. Suppose a child receives texted invitations to enter contests or vote for favorite television show contestants. The child may text replies without realizing that premium data charges are involved. Suppose a family gets a new mobile phone and the teenagers send hundreds of text messages before the parents realize the plan did not include unlimited texting. In both cases, parents may file lawsuits.  It is always important to make sure charges associated with texting are clear or that such charges may be incurred, even if the texting marketer is not a carrier.

There are other legal complications associated with marketing to kids which may prohibit the practice.  For example, the Children’s Online Privacy Protection Act (“COPPA”) prohibits the collection of data over the internet from children under the age of 13.  While the application of COPPA to mobile marketing is still unsettled, there are certain practices that clearly trigger compliance requirements.  If that is the case, marketers must obtain parental consent before collecting personal information from the child via the cell phone.

As mobile marketing evolves, so too will the way laws are interpreted and applied to the new technology.  Marketers must carefully structure their campaigns to avoid the risks associated with the unclear legal environment.  Nevertheless, solutions to the legal quandaries in this area exist to ensure that the exciting growth of this industry will continue. 

© 2009 Hughes & Bentzen, PLLC.

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