The commission's complaint, filed Tuesday in U.S. District Court for the Central District of California, alleges that Huntington Beach resident Phillip Flora sent millions of unsolicited text messages to consumers advertising loan modification and debt-relief programs. In one 40-day period starting in August of 2009, Flora allegedly sent 5.5 million such messages.
Flora also allegedly collected and sold the phone numbers of people who responded to the ads, including people who responded for the sole purpose of asking him to stop spamming them. "Many recipients of defendant Flora's text message spam have experienced annoyance, frustration, and a sense of harassment from receiving the spam," the complaint alleges.
Unlike the case with email spam, sending unsolicited SMS ads does not violate the federal CAN-SPAM law. But the FTC alleges that the ads are still unlawful as unfair and deceptive business practices.
The authorities say the ads were deceptive because they directed users to a site with "gov" in the domain name -- loanmod-gov.net -- even though the site had no connection to the government. The FTC also alleges that the ads are unfair to consumers because many recipients were charged for the SMS ads by their wireless carriers.
The FTC is seeking an order directing Flora to stop sending the ads and monetary damages, including restitution to the recipients who were charged for the text messages. FTC attorney Robert G. Schoshinski says industry estimates show that around 12% of all wireless users are charged up to 20 cents per message for incoming texts. "The damages could potentially be very large," he says.
This lawsuit marks the first time the FTC is wading into SMS spam, but not the first time complaints about text messages have landed in court. Consumers themselves have recently begun suing alleged SMS spammers for violating the Telephone Consumer Protection Act. That statute prohibits marketers from using automatic telephone dialing systems to make calls to cell phones unless the owners have consented.
An influential appellate court ruled in 2009 that a consumer could pursue a lawsuit against publisher Simon and Schuster and mobile marketing firm ipsh! for allegedly sending unsolicited SMS ads promoting Stephen King's "Cell."