Mobile firm Jawa and related entities have settled a lawsuit centered on premium SMS charges and brought by the State of Texas last year. As a result, the companies must pay $2 million, repay customers for unauthorized charges and submit to random audits.

The state alleged that Jawa was improperly adding expensive, unauthorized charges to Texans? monthly mobile phone bills. A similar case brought by Verizon Wireless also appears to have been settled, although it is not clear if Jawa paid Verizon any money in that settlement.

?These cases demonstrate how mobile marketing campaigns, especially premium campaigns where consumers are charged in addition to their message plans, must be closely monitored for compliance with the wireless carriers? requirements,? said Jason Koslofsky, an attorney with ArentFox LLP, Washington.

?Jawa got in trouble with both the government, the Texas Attorney General, and industry, Verizon, because of the allegations of how it was running its premium text message campaigns," he said.

Jawa did not respond to a request for comment.

Misappropriated short codes
The case arose last year when Jawa was accused of collecting unauthorized or deceptive charges on consumers? wireless bills in Texas through premium text message alerts.

In the judgment, the defendants deny the allegations and both parties agree that neither the judgment nor the payment of money by the defendants constitutes an admission of any violation.

The defendants were accused of misappropriating approved short codes for unapproved ?shadow? campaigns that did not comply with the state?s and the carrier?s policies.

Additionally, the defendants were accused of taking actions such as blocking some IP addresses from accessing the Web site associated with the shadow campaigns as a way to prevent Verizon Wireless from finding the Web sites during its normal monitoring of SMS campaigns for compliance.

Like other wireless carriers, Verizon offers its subscribers the opportunity to purchase premium content from third-party content providers. This content is often advertised on the content providers? Web sites and delivered to subscribers through text messages.

To ensure its subscribers are aware of and authorize the charges associated with the content, Verizon requires that content providers follow the MMA?s Best Practice Guidelines.

The settlement with the State of Texas was reached last week. The defendants are being required to establish both a toll-free telephone number and a Web site to help all affected customers in addition to making payments.

The parties named in the settlement are Eye Level Holdings, LLC; Cylon, LLC; Jason Hope; and Wayne DeStefano.

For future mobile marketing campaigns, JAWA must also make detailed disclosures, establish a compliance program and submit to random semi-annual audits.

Lessons learned
The key lesson from this suit is that marketers need to clearly and conspicuously disclose the material terms of their offers, including the prices associated with those offers. Marketers can follow the MMA?s Best Practice Guidelines to help insure their campaigns are not rejected by carriers.

Text messaging campaigns that attempt to defraud consumers and carriers have the potential to slow the growth of mobile marketing by making consumers wary of it. They could also encourage regulators to pass more restrictive laws.

Per Mr. Koslofsky, Verizon?s suit against Jawa also appears to have been settled.

?In a recent court filing, Verizon and Jawa state that the parties ?have agreed to compromise and settle all matters and issues in dispute,?? Mr. Koslofsky said.

?Jawa appears to have agreed to obtain prior written permission from a Verizon designee before initiating any premium text message campaigns on Verizon?s network and to comply with the Mobile Marketing Association guidelines and ?any other Verizon specific requirements," he said.

?It is not clear if Jawa paid Verizon any money in settlement."