The Federal Trade Commission is taking action to stop a mobile phone cramming operation that has placed tens of millions of dollars on consumers’ mobile phone bills without their permission. In its complaint, the FTC seeks to shut down the operation and recover money lost by consumers.
The FTC’s complaint charges that Lin Miao and Andrew Bachman, through a number of companies they owned and controlled, pitched “love tips,” “fun facts,” and celebrity gossip alerts sent by text message to consumers, but placed monthly subscription fees for these “services” on consumers’ mobile phone bills without their authorization. The practice, known as mobile cramming, relies on the fact that consumers often don’t closely examine their monthly statements, or many assume that charges are legitimate.
“This case puts another dent in the armor of scammers who use mobile cramming to take advantage of consumers across the country,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “The FTC will continue working to protect consumers from unwanted third-party charges on their mobile phone bills.”
According to the complaint, consumers allegedly received text messages with random factoids that they dismissed as spam without realizing they had received them through a paid subscription service they did not knowingly buy. The defendants also allegedly used misleading website offers to obtain valid consumer phone numbers that they used to sign up consumers for their services without their knowledge.
In one instance, a website told visitors they had won free Justin Bieber tickets, which they could claim by filling out an online quiz. Part of the process required consumers to enter their phone number, and while consumers didn’t receive the Justin Bieber tickets, their phone numbers were likely signed up for one of the defendants’ paid services.
The charges continued to appear on consumers’ bills until the consumers noticed them and took action to unsubscribe. The charges, typically $9.99 per month, often appeared on consumers’ bills with inscrutable names like “77050IQ12CALL8663611606” and “25184USBFIQMIG” and in many instances, consumers did not notice the variations in the amount of their bills from month to month.
When consumers did notice the charges, the process of getting a refund was often highly cumbersome. In some cases, consumers could reach representatives of the company, who would promise refunds that never arrived. In other cases, consumers were able to get partial refunds from their phone company, but only for a limited number of months – sometimes far less than the length of time they were billed. The number of consumers seeking refunds from their phone companies was as high as 40 percent in some months, and some carriers suspended the defendants from placing charges on consumers’ bills.
The FTC’s complaint alleges that the defendants violated the FTC Act by deceiving consumers, leading them to believe they were obligated to pay for the defendants’ premium text message services. The defendants also violated the FTC Act by unfairly billing consumers for services they did not ask for.
The defendants in the case are Tatto, Inc. (also doing business as WinBigBidLow and Tatto Media); Bullroarer, Inc. (also doing business as Bullroarer Corporation Pty. Ltd.); Shaboom Media, LLC (also doing business as Tatto Media); Bune, LLC; Mobile Media Products, LLC; Chairman Ventures, LLC; Galactic Media, LLC; Virtus Media, LLC; Lin Miao and Andrew Bachman.
The Commission vote authorizing the staff to file the complaint was 4-0. The complaint was filed in the U.S. District Court for the Central District of California on Dec. 4, 2013, and a temporary restraining order with an asset freeze was granted against the defendants on Dec. 5, 2013.
NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated and it appears to the Commission that a proceeding is in the public interest. The case will be decided by the court.
The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.