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Florida attorney general reaches $1M settlement with mobile content marketer

Continuing his chase of errant mobile firms, Florida's attorney general has concluded a $1 million settlement with Media Breakaway LLC, a Colorado-based marketer of content for mobile phones.

Per the Dec. 19 agreement with Florida top cop Bill McCollum's cyber fraud section of his economic crimes division, Media Breakaway and its affiliates will have to comply with the attorney general's guidelines on clear and conspicuous disclosure of material terms in the online marketing of mobile content.

"These compliance guidelines will help ensure meaningful disclosure so that all consumers, including minors, fully understand what they are purchasing," Mr. McCollum said in a statement supplied by his office in Tallahassee, FL.

Media Breakaway offers content such as ringtones and wallpaper for mobile phones which it marketed by Internet advertising. The Florida attorney general's office found that the company failed to clearly and conspicuously describe the prices and terms of service.

Not surprisingly, the mobile content, which Media Breakaway is alleged to have described as "free" or "complimentary," led to consumers unwittingly signing up for costly monthly subscriptions, according to the attorney general.

Mr. McCollum's office stepped into the picture when a number of complaints led to an investigation over months. The sleuthing revealed that thousands of Florida consumers had received charges on their mobile phone bills for mobile content downloads that they had neither sought nor authorized.

Pursuant to the settlement, Media Breakaway is required to list the price and other material terms of purchase conspicuously and specifically on all online transaction screens. The goal is to ensure that consumers see and understand the terms and conditions of the content offered.

The $1 million fine will be used to fund other investigations into cyber fraud and to support cyber safety education, the Florida attorney general's office said.

What does this mean for the mobile industry at large?

In this interview, Gonzalo Mon, attorney with Washington law firm Kelley Drye & Warren LLP, calls for honest disclosure of all costs associated with mobile offers. "Few things generate more complaints from consumers more quickly than surprise charges," Mr. Mon said.

What's the key issue that the Florida AG had with this marketer?
The Florida AG alleged that Media Breakaway lured people to sign up for services with promises of free content without adequately disclosing all the costs, terms and conditions associated with the content.

Media Breakaway provides mobile content, such as ringtones and wallpaper. Many of the company's ads described the content as "free" or "complimentary," even though there were actually charges associated with the content.

Thousands of consumers who downloaded the content were later surprised to learn that they had signed up for monthly subscriptions.

After receiving a large number of complaints, the AG challenged Media Breakaway, arguing that the company failed to adequately disclose the materials terms of its offers.

What did the marketer do that violated the law?
Advertisers are required to clearly and conspicuously disclose the material terms of their offers.

In general, this means that a disclosure has to be made prominently and in close proximity to the claim it modifies.

Moreover, a disclosure cannot contract the claim it modifies.

By touting "free" and "complimentary" services and burying details of the costs in the fine print, Media Breakaway failed to meet its responsibilities under various advertising laws.

What implications does this have for mobile marketing?
Mobile marketers need to ensure they clearly and conspicuously disclose the terms of all of their offers.

This is particularly true if there are costs associated with the offers -- few things generate more complaints from consumers more quickly than surprise charges.

Many companies currently struggle with how to make disclosures in media such as print, television and the Internet.

Those challenges are even greater to the extent ads appear on mobile devices, many of which have screens the size of Post-It notes.

What does this legal action change for mobile marketing?
This doesn't change very much because the case is just a new application of existing doctrines.

Advertisers have always been required to ensure their ads are truthful and not misleading. And advertisers have always been required to ensure that material terms are clearly and conspicuously disclosed.

Again, the trick is how to comply with these requirements in the mobile space where there is a lot less room.

That said, based on the AG's press release, it looks like most of the ads at issue were marketed on the Internet, not on mobile phones. So Media Breakaway failed to comply with the law, even though they had adequate space to make disclosures.

This action does demonstrate, though, that regulators -- and particularly the Florida AG -- are taking a close look at how companies market mobile goods and services.

And the $1 million payment demonstrates the high risks of getting things wrong.

Who stands affected by the settlement?
Although the settlement is only binding on Media Breakaway, the principles behind it affect all companies that advertise their goods and services, regardless of the advertising medium.

Again, advertisers must ensure that their ads are not misleading and that they clearly and conspicuously disclose all material terms.

This settlement and the ones preceding it demonstrate that the Florida AG is paying close attention to mobile marketers.

Your advice to mobile marketers?
Florida has been very active in this area over the past year.

In addition to these types of actions, we know that the AG is developing a zone system that will dictate where and how terms should appear on a mobile flow.

Until the system is unveiled, marketers should take a look at the types of issues that prompted the recent AG investigations in Florida as well as the resulting settlements.

These paint a clear picture of what the AG finds to be unlawful and worthy of a challenge.

Although the majority of the action has come from Florida, we know that other state AGs also find these things to be unlawful.

Given the complexities of mobile marketing -- as well as the high risks of getting things wrong -- mobile marketers should consult with their legal counsel before engaging in any mobile campaign.