Marketing Misfires Trigger More 'Text Spam' Lawsuits

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Text messages are an irresistible marketing opportunity for brands to connect with their customers. But some text campaigns are tripping over a federal law, leaving companies with a nasty legal bill instead of new sales.

In a federal class action suit filed last week in Oakland, a California man accused a PR firm of sending an unsolicited quit smoking message to his cell phone. He said the firm, PHD, broke the Telemarketing and the Telephone Consumer Protection Act (TCPA) and should be penalized at least $5 million.

The Oakland case appears to be one of at least a dozen such lawsuits filed in recent years against companies like Burger King, Jiffy Lube and NASCAR. The lawsuits are not only embarrassing for the companies — they are expensive. In 2008, shoe maker Timberland agreed to set aside $7 million for a settlement under which it agreed to pay consumers who received unauthorized text messages $150 each. And publisher Simon & Schuster (NYSE: CBS) agreed to pay up to $175 to everyone who received a text message about a new Stephen King book.

These stiff penalties may reflect a perception that “text spamming” is an especially invasive form of unsolicited advertising. This is doubly so for consumers who do not have unlimited texting plans and face the indignity of having to pay for a nuisance advertisement. The ads in question are typically from “short codes” (five or six digit numbers) that allow senders to target many recipients at once across various phone carriers.

According to experts, there are two types of “text spamming.” The first is conducted by rogue companies who purchase lists of cell phone numbers from third parties and then blast them to consumers via SMS websites. The second type of spamming arises when respectable companies blunder in their marketing campaigns by failing to respect the terms of the TCPA.

“There is confusion because a lot of marketers are accustomed to the rules for email solicitation where you only have to provide customers with an opportunity to opt-out,” said Gonzalo Mon, a partner in the advertising group of Kelley Drye in Washington. Mon adds that the confusion arises in part because the TCPA was passed in 1991 — at least a year before the first text message was ever sent (it reportedly read ‘Merry Christmas’).

Since that time, courts have broadened the law, which was originally designed to protect consumers from telemarketers. Companies have challenged the law’s application to text messaging, but in 2009 the 9th Circuit appears to have ruled definitely that sending a text is the same as “a call.”

In the meantime, mobile-based marketing has soared in popularity, according to Derek Johnson, the CEO of text-marketing firm, Tatango. Johnson says it can be hard for companies to navigate the laws for this type of campaign and suggests that marketing associations could do a better job of providing guidance. He says that he provides his clients, who include Senator Scott Brown and pizza chain Papa Murphy’s, with a legally bulletproof “double opt-in” approach. This requires that a cell phone user first send a request to receive messages from the client and then reply to a text in order to confirm the request.

According to Mon, the attorney, the Mobile Marketing Association sets out guidelines that explain when a “single opt-in” is acceptable and others where a double opt-in is required. “As a general rule, if companies comply with MMA guidelines, they’ll be complying with the law,” he says.

Lawsuits in the past have targeted the companies that sent the SMS messages. But according to Mon, the law firms behind the suits have come to target well known brands because they have the deep pockets to pay for settlements.

A spokesperson for Omnicon, the parent company of the PR firm that was sued last week, had no comment. The text messages that form the basis of the lawsuit were sent on behalf of the American Legacy Foundation, an organization funded by tobacco makers that encourages teens not to smoke.

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