Mobile Marketing Derailed: How Curbing Cellphone Spam in Satterfield v. Simon and Schuster May Have Banned Text-message Advertising

• Citation: Vol. 6 No. 1
• Publication year: 2010

Washington Journal of Law, Technology and Arts Volume 6, Issue 1 Summer 2010

Mobile Marketing Derailed: How Curbing Cellphone Spam in Satterfield v. Simon and Schuster May Have Banned Text-Message Advertising

Gareth S. Lacy (fn*)

ABSTRACT

The risk of receiving cell-phone spam-in the form of unsolicited text messages-grows as advertisers increasingly target cell-phone users. The Telephone Consumer Protection Act of 1991 (TCPA) clearly prohibits unsolicited telephone calls made by an automated telephone dialing system (ATDS) without the recipient's express prior consent. But until the Ninth Circuit's decision in Satterfield v. Simon and Schuster, it was unclear how TCPA applied to text messages. Simon and Schuster argued their text messages were not "calls" under the TCPA and were not sent by an ATDS. The Ninth Circuit disagreed and held a text message is a "call." The court also held an ATDS means any equipment with capacity to store or dial random or sequential telephone numbers, regardless of whether such calls were actually made. This sweeping rule arguably applies to any computer. The court also adopted narrow legal definitions of "brand" and "affiliate" that could hinder any business seeking third-party advertisers to send messages on its behalf. This Article explores how Satterfield exposes mobile advertisers to significantly increased liability.

Table of Contents

Introduction......................................................................................34

I. Text-Message Advertising and Mobile Spam Prevalence..........36

II. How Satterfield Restricts Mobile Advertising............................38

A. Text Messages Are Calls Under TCPA................................39

B. ATDS Means "Capacity" to Dial Randomly or Sequentially........................................................................42

C. "Affiliate" and "Brand" Defined Narrowly by Ownership and Control........................................................................44

Conclusion........................................................................................46

Practice Pointers................................................................................47

INTRODUCTION

In 2004 Laci Satterfield downloaded a free ringtone for her eight-year-old son's cell phone from www.nextones.com.(fn1) Two years later publishing giant Simon and Schuster launched an advertising campaign using text messages to promote Stephen King's latest horror novel, Cell. (fn2) The company outsourced the advertising to ipsh!, Inc. (ipsh!), a mobile marketing firm with 100,000 cell-phone numbers purchased from various Web sites including Nextones.(fn3)

At half-past midnight on January 18, 2006, Satterfield's son received Simon and Schuster's text-message advertisement:The next call you take may be your last ... Join the Stephen King VIP Mobile Club at www.cellthebook. com. RplySTOP2OptOut. PwdbyNexton.(fn4)

The message terrified the young boy. Satterfield wrote "STOP" in response. Then she sued Simon and Schuster and ipsh!(fn5) for sending an unsolicited text-message advertisement in violation of the Telephone Consumer Protection Act of 1991 (TCPA).(fn6) She later sought to certify a class of 60,000 people who received similar messages.(fn7)

Simon and Schuster moved for summary judgment by arguing: TCPA did not apply because text messages were not "calls," the messages were not sent by a prohibited ATDS, and Satterfield consented to receive promotions from Nextones affiliates and brands.(fn8 )The district court ruled for Simon and Schuster.(fn9) But the Ninth Circuit reversed and held: (1) a text message is a "call" under TCPA; (2) an ATDS is any equipment with capacity to store, produce, or call random or sequential numbers; and (3) Simon and Schuster was not an "affiliate" or "brand" of Nextones and therefore Satterfield did not consent to receive the text-message advertising.(fn10) The decision reinstated Satterfield's effort to certify a $90-million class action lawsuit.(fn11)

This Article will describe the laws regulating text-message advertising and will explore how Satterfield v. Simon and Schuster exposes mobile advertisers to liability under TCPA. In particular, the court's broad definition of a prohibited ATDS-any computer with capacity to generate random numbers-may further restrict text-message marketing. The court's definitions of "affiliate" and "brand" may also discourage the use of plain language in terms and conditions displayed to consumers visiting Web sites.

I. TEXT-MESSAGE ADVERTISING AND MOBILE SPAM PREVALENCE

Text messaging, or short message service (SMS), allows cell-phone users to send and receive 160-character text-only messages.(fn12) Carriers charge per text message or offer monthly flat rates.(fn13) SMS supports sending messages phone-to-phone or Internet-to-phone.(fn14) Phone-to-phone messages are directed to cell-phone numbers. Internet-to-phone messaging allows users to send their message to an e-mail address assigned by the wireless carrier; the carrier then converts this e-mail into a text message.(fn15)

Text messaging is big business. In 2008 American cell-phone users sent an average of seven billion text messages per month, up 20 percent from 2007.(fn16) The mobile advertising market, including text message marketing, is projected to be worth $12 billion by 2011.(fn17) Text messaging is now more popular than cell phone calls.(fn18)

A broad range of technology providers are involved in creating, processing, and distributing text-message advertising.(fn19) In Satterfield, for example, five companies accessed Satterfield's phone number before she received the text-message advertisement.(fn20) In an effort to self-regulate, more than 600 carriers, advertisers, manufacturers, and software providers formed the Mobile Marketing Association (MMA) in 2000 to issue voluntary best practices guidelines for the mobile advertising industry.(fn21)

Despite these efforts, private lawsuits alleging spam text messaging (also known as wireless spam, cellular spam, mobile spam or m-spam) continue to target mobile advertisers.(fn22) American cell-phone users received 1.5 billion spam messages in 2008-a 37 percent increase from the 1.1 billion messages received in 2007.(fn23)

II. HOW SATTERFIELD RESTRICTS MOBILE ADVERTISING

Two federal laws regulate text-message advertising: (1) TCPA(fn24) and its FCC regulations(fn25); and (2) the Controlling the Assault of Non-Solicited Pornography and Marketing Act (CAN-SPAM)(fn26) and its FCC regulations.(fn27) TCPA permits private lawsuits(fn28) and does not preempt state anti-spam laws.(fn29) In contrast, CAN-SPAM generally prohibits private lawsuits(fn30) and preempts most state law.(fn31) Satterfield ultimately rested its decision on TCPA. The court held a text message is a call under TCPA, equipment sending the message is prohibited if it has the capacity to dial randomly or sequentially, and consent to receive messages from an "affiliate" or "brand" is limited to corporate relationships based on ownership or control.(fn32) This holding will likely make lawful mobile advertising more difficult for businesses.

A. Text Messages Are Calls Under TCPA

TCPA prohibits "any call ... using any [ATDS] ... to any telephone number assigned to ... a cellular telephone service . . unless the recipient gave prior express consent.(fn33) TCPA does not define "call." Satterfield affirmed a 2003 FCC determination that "call" means "both voice calls and text calls to wireless numbers, including, for example, short messages service (SMS) calls ..."(fn34) While previous judicial decisions had reached similar conclusions, Satterfield is the first opinion to...