SMS Text Advertising: Class Action Attraction

Marketing to cell phones via SMS text messaging has steadily been gaining popularity.  Like faxing, texting is fast, cheap, efficient, and produces results. However, because texting is sent to web-enabled devices using a telephone network, the FCC, the FTC, and many courts have determined that the practice falls under both the Telephone Consumer Protection Act (TCPA), and the Controlling the Assault of Non-Solicited Pornography and Marketing Act (CAN-SPAM).

The TCPA was originally enacted in 1991 to apply to telemarketing sales calls, and was later interpreted to apply to SMS text messages sent using an “automatic telephone dialing system.”  A string of recent court cases, including a 2009 9th Circuit Court of Appeals case called Satterfield v. Simon & Schuster, have consistently ruled that text messages are identical to phone calls, as far as the law is concerned, which means that you must obtain the consent of the holder of a wireless device before sending promotional SMS text messages to it.

A provision of the TCPA gives consumers a private right of action to sue for TCPA violations in state courts, and consumers can recover $500 to $1500 for each call, fax, or text received.   In most cases, judges have little sympathy for the company that initiated the unwanted call, and the law has spawned a cottage industry for litigious plaintiffs and attorneys.  Like any good fisherman, many of these professional litigants subscribe to multiple lines in the hope of receiving an unwanted call.

The TCPA has also spawned a wave of successful class action litigation against fax advertisers and robodialers.   Texting is next on the list, and plaintiffs have been earnestly testing whether courts will certify TCPA class action lawsuits based on text messages, and the results have been favorable.  In a number of recent cases, courts have ruled that it is unnecessary for plaintiffs to have been charged for an unwanted text, and have routinely defendants’ arguments that they first obtained consent before sending the offending text.

Defendants in recent TCPA class actions based on text message marketing campaigns include major publishing companies, retailers, and restaurant chains such as Domino’s Pizza and Burger King.  Liability can be significant, which leads to hefty settlements. Simon and Schuster settled a texting case for $10 million, and a major film company has reportedly agreed to a $16 million settlement related to a 2005 text campaign. Another large retailer reportedly funded a $7 million class action settlement, which included $1.75 million in attorney’s fees.

Any company considering SMS text advertising campaign should consider the potential for class action litigation, and take all steps necessary to ensure their marketing practices are compliant.

Author: Seth Heyman
Seth D. Heyman is a California attorney with extensive experience in advertising and marketing law, corporate law, contracts, governmental regulations, international business, and Internet law. He has counseled numerous successful companies, both public and private, and was responsible for regulatory compliance, contract management, corporate governance, and HR best practices for multiple organizations in many diverse industries, including marketing, telecommunications, energy, and technology development. He offers insight and guidance on federal and state direct mail, TV, radio, telemarketing, and Internet marketing laws, as well as online promotions, Internet privacy, data protection regulations, and similar matters.

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