FTC Issues Staff Report on Mobile Commerce Marketing

Kelley Drye Client Advisory

On April 22, 2009, the Federal Trade Commission (FTC) issued a staff report detailing its findings from the public town hall meeting held on May 6 and 7, 2008. Based on its findings, the FTC has decided to expedite the regulatory review of the Children’s Online Privacy Protection Rule. The review, originally set for 2015, will now begin in 2010.

Town Hall Meeting

The town hall meeting consisted of nine sessions that focused on different aspects of new developments in mobile commerce and the subsequent consumer protection issues involved. Each session consisted of several panelists, including advertisers, device manufacturers, telecommunications carriers, aggregators, consumer advocates, and regulators, and was moderated by at least one FTC staff attorney.

The sessions focused on the following issues:

  1. the mobile marketplace in the United States;
  2. mobile messaging, specifically the commercial uses of mobile messaging and the consumer protection issues raised by premium rate and unsolicited mobile messaging;
  3. mobile applications;
  4. location-based services;
  5. mobile advertising and marketing;
  6. managing mobile devices;
  7. the challenges associated with mobile marketing to children and teens;
  8. industry-developed best practices in the areas of billing, disclosures to consumers, complaint handling, and dispute resolution; and
  9. mobile security, specifically the risks to and vulnerabilities of mobile phones.

During the sessions, telecommunications carriers and aggregators highlighted the industry-wide efforts to adopt best practices in advertising and billing for mobile services and to enhance mobile security, specifically with respect to mobile phones used by children and teens. While consumer advocates and regulators acknowledged industry efforts in the consumer protection area, they raised concerns about current practices regarding premium text message services, location-based services, and the review of industry best practices, as well as about the privacy and security issues surrounding mobile advertising, data storage, and mobile phone use by children. An extensive summary of the meeting is available in our May 12, 2008, client advisory, available here.

The FTC staff report, titled Beyond Voice: Mapping the Mobile Marketplace,” provides a session-by-session summary of the town hall meeting, as well as a summary of the FTC’s findings. While the FTC acknowledges the mobile commerce industry’s efforts in adopting industry-wide practices, the Commission recognizes that there are issues that the industry still needs to address and stresses the need for increased monitoring of mobile commerce, collaboration among industry associations, consumer groups, and law enforcement, and consumer and business education.

Specifically, the FTC has released the following findings:

  1. The increasing use of smartphones to access the Internet provides a new, unique privacy challenge, especially regarding children. The FTC had originally scheduled a regulatory review of the Children’s Online Privacy Protection Rule to determine whether the review should in any way be modified to address changes in the mobile marketplace. In light of the observations in the published staff report, the Commission has decided to expedite the review. The review was originally scheduled for 2015, but it will now begin in 2010 and will provide an opportunity for extensive comment.
  2. Most complaints to state regulatory agencies involve inadequate cost disclosures for mobile services. Therefore, the FTC will continue to monitor cost disclosures, bring appropriate law enforcement action, and work with industry to improve its self-regulatory enforcement.
  3. The FTC and its law enforcement partners should continue to monitor the impact on consumers of unwanted mobile text messages, malware, and spyware, and take enforcement action as needed. Currently, wireless carriers block hundreds of millions of unsolicited text messages each month, creating a substantial cost for the carriers. Malware and spyware have not yet emerged as significant problems on mobile devices; however, the FTC anticipates that, as consumers increasingly use their mobile devices for Internet access, that situation will change. The FTC staff encourages development of strategies that prevent or minimize the spread of spam, malware, and spyware on mobile devices.

Kelley Drye & Warren LLP

Kelley Drye & Warren’s Privacy and Information Security practice is a leader in advising clients on privacy and information security issues and has been at the forefront of developments in this growing area of the law. Our attorneys regularly counsel clients regarding all aspects of privacy and data security compliance, including drafting and amending privacy and information security policies, advising clients on interpreting their own policies, crafting data security programs for clients, performing privacy and/or data security audits of existing business practices, drafting agreements with third parties regarding their obligations in connection with handling clients’ customer data, and representing clients in connection with federal and state regulator privacy investigations regarding their privacy and data security practices.