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FTC Cracks Down on Text Spam Offering 'Free' Gift Cards

FTC Cracks Down on Text Spam Offering
March 8, 2013 1:45PM

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"Today's announcement says 'game over' to the major league scam artists behind millions of spam texts," said Charles A. Harwood of the FTC's Bureau of Consumer Protection. "The FTC is committed to rooting out this deception and stopping it. For consumers who find spam texts on their phones, delete them immediately. The offers are, in a word, garbage."

Neustar, Inc. (NYSE: NSR) is a trusted, neutral provider of real-time information and analysis to the Internet, telecommunications, information services, financial services, retail, media and advertising sectors. Neustar applies its advanced, secure technologies in location, identification, and evaluation to help its customers promote and protect their businesses. More information is available at www.neustar.biz.

The Federal Trade Commission is cracking down on affiliate marketers that allegedly bombarded consumers with hundreds of millions of unwanted spam text messages in an effort to steer them toward deceptive Web sites falsely promising "free" gift cards.

The FTC charged 29 defendants in eight individual complaints with collectively sending more than 180 million unwanted text messages to consumers, many of whom had to pay for receiving the texts.

The messages promised consumers free gifts or prizes, including gift cards worth $1,000 to major retailers such as Best Buy, Walmart and Target. Consumers who clicked on the links in the messages found themselves caught in a confusing and elaborate process that required them to provide sensitive personal information, apply for credit or pay to subscribe to services to get the supposedly "free" cards.

FTC: Game Over

"Today's announcement says 'game over' to the major league scam artists behind millions of spam texts," said Charles A. Harwood, acting director of the FTC's Bureau of Consumer Protection. "The FTC is committed to rooting out this deception and stopping it. For consumers who find spam texts on their phones, delete them immediately. The offers are, in a word, garbage."

The FTC complaints targeted defendants who sent the unwanted text messages, as well as those who operated the deceptive Web sites. The FTC is also pursuing a contempt action against a serial text message spammer, Phil Flora, who was barred in 2011 from sending spam text messages and who is accused of being part of this spam texting scheme as well.

The FTC's complaints seek restraining orders against the defendants, preventing them from continuing their alleged deceptive and unfair practices as well as preserving and accounting for their assets.

Difficult To Stop

Brad Shimmin, an analyst at Current Analysis, told us he was glad the FTC was willing to move aggressively to limit the amount of noise consumers received through these communications channels.

"All of it is annoying but some of it can be dangerous, especially for demographics that can be perceived as easy prey for scams," Shimmin said. "I applaud the FTC, but looking at our past history in trying to crack down on this type of nefarious behavior it seems that globally it's a lot easier for criminals to move operations to places where they are no longer subjected to the laws that bring them to justice. I don't know how effective it's going to be over the long run."

The FTC alleged that the operators of these sites violated the Federal Trade Commission Act by failing to tell consumers about all the conditions attached to the "free" gift, including the possibility that consumers would actually be required to spend money to receive the gift.

According to the FTC, the defendants who sent the text messages were paid by the operators of the "free" gift Web sites based on how many consumers eventually entered their information. The operators of the Web sites were in turn paid by those businesses who gained customers or subscribers through the "offer" process.

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