Beware of Co-Reg in Mobile Marketing

MediaPost yesterday reported that a new organization, Mobile Advocacy Coalition, was formed. It intends to ask the Federal Communications Commission to specify that technology companies that act as "mere conduits" aren't liable for wireless ads that violate the Telephone Consumer Protection Act, according to the group's attorney, Scott Delacourt, a lawyer at Wiley Rein.

The main reason why this lobbying group was formed was response to the Ninth Circuit Court of Appeal's recent decision in a lawsuit against Simon & Schuster and mobile marketing company ipsh!.

In a nutshell, Simon & Schuster are the defendants in a $90M class action lawsuit stemming from a 2006 incident. Laci Satterfield filed the suit after her young son is said to have received a text message in the middle of the night warning him that the "next call you take may be your last." The text was a promotion for Mr. King’s book, "The Cell." Though the text message was sent in the middle of the night, I'm not aware of whether the child woke up in the middle of the night to read said text message.

First of all, you should get to know a bit more about the Ninth Circuit Court of Appeals. Headquartered in San Francisco, this is the same group of enlightend individuals that ruled in 2002 that it was not legal to recite the Pledge of Allegiance because it contains the words "under God".

At the heart of the matter is the federal Telephone Consumer Protection Act (TCPA) that makes it unlawful to generate automated calls to mobile phones without the "prior express consent of the called party." The Ninth District Court of Appeals holds that text messages sent to mobile phones is the same thing as voice calls. The TCPA applies to automatic telephone dialing systems (ATDS), equipment that has "the capacity to store or produce telephone numbers to be called, using a random or sequential number generator and to dial such numbers."

But here's where the hair splitting begins. The appellate court wasn't concerned with whether the system used to the send the text messages was an actual ATDS. They felt that the proper question to ask is whether system had the capacity to be used as an ATDS. With no evidence presented during the original trial to the contrary, the court overruled the original judgment and ordered the case back to trial.

The sequence of events that lead to that fateful text message being sent on that fateful night is commonly known as "co-registration". Ms. Satterfield did not directly opt-in to receive text messages from Simon & Schuster. She became a registered user of Nextones in order to receive a free ringtone. During the registration process, she checked a box which read, in part: "I would like to receive promotions from Nextones affiliates and brands" - boilerplate verbiage used in co-registration. The appellate court rules that Simon & Schuster is neither an affiliate of Nextones nor is it a brand of Nextone. Therefore, the text messages they sent in this campaign were unsolicited - a violation of the TCPA.

Co-Reg is a widespread tactic used for lead generation especially in email marketing. It is one means of generating new leads and customers. But it's also one source of messages that recipients classify as spam. Irritating as it is, email spam is nevertheless tolerated a lot more than SMS spam - partly because mobile phones are considered much more personally than the so-called personal computer, and also partly because people originally paid for each text message while email is free.

Mobile marketers should continue to follow this case because it has direct bearing on our industry. While co-registration may be an acceptable lead generation tactic used in email marketing, the case of Satterfield v. Simon & Schuster, Inc. indicates that mobile marketers should proceed with extreme caution if not avoid it altogether.