Monthly Archives: August 2013

Text Message Marketing Laws: FTC Fines Text Spammers

text message marketing laws Text message marketing laws exist. In fact, officials are always looking to bust spam schemes. Below, we’ll review one such promotional compliance case.

The Federal Trade Commission sued a large mobile spam ring for, essentially, breaking text message marketing laws. Apparently, the defendants unlawfully gathered information and sold it to third-party marketers.

Specifically, the case cited the Federal Trade Commission Act and the Telemarketing Consumer Fraud and Abuse Prevention Act violations. Subsequently, plaintiffs sought preliminary and permanent injunctive relief.

Officials also asked for equitable restitution on behalf of the victims.

Text Message Marketing Laws: The FTC Investigates, Then Sues

Back in 2011, FTC staffers uncovered evidence that consumers were being duped into revealing identifiable information in exchange for “free merchandise.”

The defendants allegedly used questionable mobile marketing techniques like:

  1. Unsolicited text messages, sent directly by the defendants and through intermediary third-parties; plus
  2. Phony prize notices.

Sample text messages listed in the complaint

  • “You WON! Go to www.prizeconfirm.com to claim your $1000 Walmart Gift Card Now!”
  • “FREE MSG: you have been chosen to test & keep the new iPad for free only today!! Go to website and enter 2244 and your zip code to claim it now!”

Second Tier Websites Collected More Information Than Users OK’d

Under the scheme, the defendants funneled participants to websites that required consumers to reveal identifiable information.

However, before claiming prizes, individuals with “winning codes” had to input their zip codes and emails. Then, after entering personal details, consumers were directed to yet another web page requiring even more personal information.

Ultimately, participants had to complete thirteen offers before claiming the “free” merchandise. And according to the FTC, the defendants shared or sold said information with robocalling marketers.

Questions About Text Message Marketing Laws?

Have legal questions about text message marketing laws or other online marketing issues? Contact Kelly Warner Law.

SEO RICO: About The Time A Law Firm Sued A Marketer Over Unmet Expectations

SEO RICO lawsuit case summaryWhen we say RICO, you may think Goodfellas. Well, think again, because a law firm pursued an SEO RICO lawsuit against an online marketing firm, over so-called “worthless [online] marketing [plans] and fraudulent link-building [plans].”

Yep, gang, you read that correctly: professional SEOs are being brought up on racketeering charges for not meeting client expectations. Does this plaintiff, the firm, have a legitimate shot at winning? Is it possible to successfully sue an SEO company for poor results? We’ll deconstruct the lawsuit and examine the complex relationship of online marketing, search engine technology, and the law.

Note: For several reasons, we use fake names when discussing headline cases.

Before We Sink Our Teeth Into The Case, Let’s Take A Quick Look At The Current State of SEO

The Uncertain World of Search Engine Optimization

Imagine you’re an elementary school educator with 20 years’ experience. You’re a rock star when it comes to teaching cursive writing, science 101, and early childhood socialization. Then, one day, without warning, you arrive, in your classroom and find 20 M.I.T. educated scientists expecting you to wax poetic about the Quantum Field Theory. Oh, and if you didn’t say something substantial and innovative, you’d get fired.

That is the environment in which online marketers deal, daily. Every so often, without warning, SEOs wake up to discover that Google changed its algorithms. Phones start ringing; angry customers demand to know why their websites no longer “show up in Google.” Simultaneously, industry forums alight with the only question on everybody’s fingertips: “Did anybody else drop dramatically in the SERPs?”

Panda and Penguin: The Algorithm Updates That Changed The Web Forever

“Keywords” used to be the end-all, be-all of online marketing. But in time, algorithms grew up, and non-keyword-laden content performed better in the SERPs.

Then, between 2010 and 2012, Google unleashed two mega-algorithm updates called “Penguin” and “Panda.”

Panda and Penguin dramatically changed the online marketing landscape. In what seemed like the stroke of a wand, tried-and-true search engine optimization methods became obsolete. Online businesses suddenly stopped generating money. Elaborate linking schemes were rendered useless. It was, in a word, pandemonium.

Online marketers worked feverishly to “figure out” the new Google. So-called link farms deteriorated like an untended city park; SEOs abandoned link mazes that dominated just 12 hours earlier; consensus on the street was that lots of high-quality content and high-quality links were the new standards.

The Panda/Penguin updates figure prominently in this RICO SEO lawsuit.

The SEO RICO Lawsuit: Who is Suing Who?

So let us get down to the particulars this SEO RICO case.

Plaintiffs: A law firm, that we’ll call “Smith & Smith” (not real name).

Defendants: Acme Marketing (not real name), an online marketing firm hired by Smith & Smith.

Timeline of the Marketing Defamation Lawsuit

From July 22 to 23, 2011, the defendants attended an Acme seminar where they received “generic” handouts. Mentioning the marketing material may seem like a random point; but, as you will soon see, it’s an essential detail in this SEO RICO case.

After the two-day seminar, Smith & Smith hired Acme to develop and maintain the firm’s online marketing program. Both parties signed a $40,000 contract, and it was off to the digital races. When the initial contract ended, Smith & Smith signed up for another 6 months of Acme’s service.

This is when the story takes a turn. Apparently, while under the second contract with Acme, Smith & Smith conducted an internal audit of its website. The firm noticed low-quality incoming links and instances of duplicate content — two pre-Panda/Penguin online marketing techniques.

Unimpressed, the attorneys ended their relationship with Acme and requested a refund. Acme refused. So, Smith & Smith filed a RICO lawsuit.

Why RICO?

RICO stands for Racketeer Influenced and Corrupt Organizations. Passed in 1970, RICO was meant as a catchall for organized crime. In brief, an individual associated with a criminal “enterprise” can be brought up on RICO charges if he or she commits two similar crimes in a 10-year period. RICO is different than other fraud charges because the focus is on a “pattern of behavior” as opposed to a one-off act. If an individual is guilty of RICO charges, he or she can be fined up to $10,000 and 20-years in prison, per incident.

Presumably in an effort to highlight the “patterned behavior” necessary to win an SEO RICO claim, the plaintiff’s lawyers explained, “this case is not being brought for lack of success per se, the lack of success merely being evidence of fraud and damages to business or property.”

The “enterprise provision” also plays a role in RICO claims. It’s not enough to bring a lone criminal up on RICO charges, he or she must be “backed” by a “coordinated enterprise” that manages long-term frauds.

Lastly, a RICO case can only be successful if the scheme affects many people and the perpetrators knowingly seek to defraud.

Arguments For SEO Racketeering

To win RICO cases, plaintiffs must demonstrate patterns of criminal activity, within a 10-year period, which affect multiple parties. In this SEO RICO case, the claimant’s lawyers highlighted several factors to support their argument.

Duplicate Content

Plaintiff Argument

The lawsuit mentions duplicate content on Acme client websites. Why? Well, according to the claim, “[Acme] engaged in an ongoing fraud upon the Victim Firms by selling the same supposedly ‘unique’ blog content for posting on the firms’ web pages to several firms at the same time.”

Possible Defense

So-called “duplicate content” wasn’t always frowned upon and regularly used by SEOs. So, the defendant could argue that the duplicate content remnants were left alone for strategic purposes (i.e., the money spent eliminating all duplicate content would cost more than implementing new strategies).

Pattern of Corruption

Plaintiff Argument

Again, to meet RICO standards, plaintiffs must establish a “pattern of corruption.” Smith & Smith argued that the defendants knowingly entered into a “RICO scheme” that “was based in part upon a series of fraudulent representations about the defendant’s experience and skills in the use of what is known as Search Engine Optimization (‘SEO’).” In other words, Acme knew its SEO techniques were worthless but continued to sell its services using the “generic” materials mentioned earlier.

From the claim:

“The continued marketing by the Defendants of internet marketing services that the Defendants knew were worthless and knew were on misleading representations to unsuspecting clients, misled the clients into believing that the sheer number of links created would yield positive optimization results. This conduct represents a pattern of activity in violation of the RICO statutes.”

Possible Defense

The defense could attack this argument from several angles. First, just because artifacts of past SEO efforts still exist online doesn’t mean said artifacts are the only efforts associated with a given site. Plus, it’s not always possible to undo past SEO efforts – efforts that, at one time, worked.

And that is not all.

Websites that don’t follow Google’s guidelines sometimes perform well in SERPs. This raises a couple of key questions:

  1. Since not following guidelines worked for some sites, is it the responsibility of marketers to follow Google’s published suggestions, or should SEOs weigh the field and use techniques that work best for each client – even if that means using frowned upon methods?
  2. Are online marketers beholden to Google’s guidelines? In the lawsuit, the Plaintiffs insinuate that Acme is fraudulently hiding behind trade secrets. Yet, Google is the poster-child for trade secret protection. As such, if search engines don’t have to make algorithms public, how can SEOs be chastised for not revealing their SEO plans? Moreover, how are SEOs supposed to follow guidelines if the art of online marketing is imprecise and in some ways subjective?

Made Use of “Wires”

Plaintiff Argument

Smith & Smith argue that by using the Internet, email, and telephones to conduct business, Acme violated 18 U.S.C. § 1341 and 18 U.S.C. § 1343. Specifically, “The defendants use of the Internet, telephones and the U.S. Mail to promote their scheme [and] to negotiate contracts for their services and receive payment for them.”

Possible Defense

If the defense convincingly argues the other points, this will be moot.

Legalities To Consider In This SEO RICO Case

Trade Secrets

These days, information rules. Trade secrets are a vital vein of the online marketing industry. As such, Smith & Smith’s insinuation that Acme purposefully “[cloaked] their schemes in allegations of ‘trade secrets’ to avoid the balance of the scheme from coming to light” is (with all due respect) at worst, a reach, at best, naïve.

The Hope Diamond of search, Google, relies on trade secrets to maintain its spot as the #1 search engine. So, it would be the height of hypocrisy for courts to to protect Google’s trade secrets, but force SEO professionals to reveal theirs.

Hyperlinks & The Law

Inferring from the lawsuit, Smith & Smith probably hired a link expert to review its website, who came back with bad news: many of the links were low-quality; plus, fewer links existed than promised. When the law firm approached Acme about the situation, the latter supposedly “claimed that the process of building links, including where the links were to be found, was a trade secret.”

The Issue of Low-Quality Links

First, as discussed, low-quality links may still linger from past SEO efforts. Sometimes it’s just impossible to remove them. Furthermore, since Google keeps changing the rules, it’s debatable if low-quality links are wholly bad. Sure, Google recently introduced a new tool that allows webmasters to “disavow” unwanted backlinks. But who’s to say Acme hasn’t already tried to disavow Smith & Smith’s bad links, but Google hasn’t gotten around to their submission? Moreover, who is to say that Google won’t change their mind about the negative value of link farms? After all, the search engine giant has reversed algorithm decisions before.

The Issue of Link Tools

Second, the Plaintiffs argue that Acme delivered fewer links than promised, which raises the question: What link-identification tool did Smith & Smith use? Because different link report tools give different results.

Potential Ramifications

Thirdly, trade secrets rule the online marketing industry. Not to be dramatic, but if Acme is forced to reveal their link strategy, it could crush an entire segment of the online economy.

Essentially, the Plaintiff’s case can be summed up by one passage in the original filing: “The action is based on the fact that, at the time the Defendants were promoting this marketing scheme…they knew the techniques they proposed to use were in violation of the guidelines already well-established and published by Google.”

In this firm’s opinion, however, Smith & Smith’s argument is questionable. The mercurial nature of Google must be taken into consideration in this SEO RICO case.

And this case should serve as a warning to online marketers and SEO professionals: Manage your clients’ expectations and don’t make empty promises. Also, make sure your client contracts address the uncertain nature of search engine marketing.

Online Trade Libel Lawsuit: Broadspring v. Congoo

online trade libel lawsuits
What happens if terrible reviews of your company land online? Worse yet, what happens if there is a sliver of truth to the terrible review. Is it still defamation?

Accusations of lie-spreading and client-poaching was at the heart of an online trade libel lawsuit between two marketing companies.

Broadspring Inc and Congoo LLC are “competitors in the online marketing” business. Apparently fierce competitors, because the former sued the latter for defamation, unfair competition, and tortious interference.

Did Broadspring operate outside legal lines or did Congoo bend the truth? The answers to these questions are the main screws on which Broadspring v. Congoo turns.

Timeline and Facts of this Online Trade Libel Case

Let’s first look at the cold-hard facts of the case.

  • On March 2, 2013, a user named “Recruiterman” created an online marketing “lens” (i.e., webpage) on Squidoo featuring reviews of Internet advertising companies, including Congoo subsidiaries Adblade and Adiant, in addition to Broadspring. Though the lens complimented Adblade and Adiant, it blasted Broadspring, reading: “most of [Broadspring’s] distribution seems to come through media buys at DSPs and other exchanges. All of their display units take users to howlifeworks.com where they embed links to advertise pages for offers like ‘make your computer faster.’”  The review also said Broadspring made it “tough to cancel credit card subscriptions.”
  • Sometime between March 2 and 7, 2013, someone updated the Squidoo lens in question to read: “Downside: A simple Google search shows that Broadspring was formerly Mindset Interactive, a notorious spyware company. Mindset was eventually shut down by the FTC in 2005 and Sanford Wallace, their founder, known as “Spamford Wallace” was banned from online activity for 5 years. In Nov 2006, Broadspring’s shareholders then launched a notorious ringtones company, New Motion dba Atrinsic. Atrinsic has $17mm in financing (from various unknown investors), became public through a shady reverse-merger. They settled 3 years ago with 6 million users scammed: http://www. ftc. gov/o s/ caselist/04 2314 2/wallacefinal judgment. Pdf
  • On March 7, 2013, a representative from one of Broadspring’s clients, Geology.com, called and canceled. When asked why, the Geology.com rep referenced an email painting Broadspring in a negative light. The rep went on to explain: “I really like the looks of your ads, the controls of your website, and the pay was very good…but I am hesitant to run the ads after seeing the above.”
  • On March 11, 2013, Squidoo “locked” the online marketing lens in question, but according to Broadspring, the damage was already done.
  • On March 12, 2013, Broadspring lawyers contacted Congoo for a reaction about the allegedly defamatory statements. Broadspring’s attorneys requested that Congoo preserve and “ESI” (electronically stored information) connected with the situation. According to Broadspring, at this point, Congoo asked for a few days to review the situation. Broadspring also asked, again, about ESI, but didn’t get a response.
  • On March 18, 2013, another Broadspring client, Tech Media Network, sent an email regarding “concerning information” and referenced the FTC judgment against Wallace. It was also on this day that Broadspring lawyers expected a formal response from the Congoo attorneys about the ESI material. Much to the former’s chagrin, Congoo brass allegedly sent back a vague, 10-word email, which didn’t address any of the aforementioned concerns.
  •  It’s important to note that Broadspring says it has evidence linking the “defamatory” Squidoo updates to an IP address “very close” to Broadspring’s New Jersey office.

Broadspring’s Side of the Story

Broadspring said Congoo’s accusations are reliable as Herodotus. With the likes of Yahoo!, MSN and CNBC on their client roster, Broadspring questioned Congoo’s characterization that Broadspring mainly deals in subscription offers. Moreover, Broadspring insisted it followed all applicable FTC regulations and doesn’t engage in any business “shadiness.” The plaintiff also highlighted its toll-free number, displayed online, as proof that people could call anytime and cancel.

Plus:

  1. The company swore that Sanford Wallace had nothing to do with Broadspring. Specifically, “Sanford Wallace was not a ‘founder’ of either Broadspring or Mindset. In fact, he has never held any equity in either of these entities nor has he ever served as an officer, director, or employee of either entity.”
  2. Broadspring argued that Atrinsic was not a “notorious ringtones company” and that the merger was done on the up-and-up, with full disclosure to the SEC.

In addition to defending their own position, Broadspring used the protective umbrella of the lawsuit to throw some punches, describing the Squidoo lens praising Adblade as “misleadingly laudatory.” Broadspring also alleged that a “substantial portion” of Adblade’s revenue comes from “continuity credit card offers” and that the defendant “falsely asserts that Adblade is very selective about the publishers with which it works.”

Cited Civil Charges

Broadspring’s lawyers cited Lanham Act violations, defamation per se, and tortious interference. In recompense, Broadspring suggests damages, injunctive relief and attorney’s fees.

Lanham Act

The 1946 Lanham Act is the backbone of United States intellectual property law and guards against false advertising. In this case, the plaintiffs argued that Congoo’s statements about Wallace’s constitute false advertising.

Defamation Per Se

Defamation per se is loosely defined as ‘defamation in it of itself,’ meaning the plaintiff doesn’t have to prove actual material loss. For example, calling someone a criminal is considered defamation per se because the reputational damage is evident.

Tortious Interference

Tortious interference is when one business interferes with another business’ contract(s). In this instance, Broadspring claims that Congoo’s solicitation of geology.com qualifies as tortious interference.

Precise Language Matters In This Online Trade Libel Lawsuit

Broadspring v. Congoo is worthy of examination because it explores what can happen when entrepreneurs, who thrive on boundary pushing, crash into each other. Moreover, it’s a case that relies on verbal exactitude and creating legal loopholes.

What do we mean by that?

Well, consider Wallace Sampson. Part of Broadspring’s argument turns on whether or not Sampson is materially connected to the business. If he is, it could be reasoned that no false statement of fact exists, thereby rendering the defamation claim moot. If Sampson is not materially tied to Broadspring, however, the plaintiff has a much stronger case.

So now let’s look at how the lawsuit is worded. Sampson is described as never having been a director, officer, or employee of Broadspring. But is he a consultant? And if Sampson is somehow profiting from Broadspring, just not as a director, officer or employee, does Congoo have the legal right to highlight this fact? Furthermore, if Wallace works with Broadspring in a freelance capacity, is he violating an FTC edict by acting as a consultant to an advertising company?

The Path To Victory?

Broadspring brought the case, so it bared the burden of proof. Congoo simply had to present counter arguments that satisfied the “balance of probabilities” standard.

Fundamental Elements of Defamation Under United States Law

While exact standards vary between jurisdictions, slander and libel law is built on three basic elements:

  1. A false statement of fact;
  2. Material harm inflicted on the plaintiff; and
  3. Intent to harm or “reckless disregard for the truth.”

So, for Broadspring to win, the company must prove that:

  1. Congoo’s accusations are false;
  2. Broadspring lost clients and money as a result of the widely distributed false statement; and
  3. Congoo purposefully lied with the goal of harming Broadspring’s business.

We’ll be keeping an eye on this case. The outcome could profoundly effect online trade libel law.

In the meantime, if you need a defamation or online marketing compliance lawyer, get in touch with Kelly Warner.

Attorneys General Want To Change Section 230 of the CDA

picture of law books on shelf to accompany blog post about change section 230 of the CDAA cabal of state attorneys general want to change Section 230 of the Communications Decency Act. If they succeed, website operators could be sued over user comments. The coalition says it simply wants the same rights as federal prosecutors, to go after threat-level-red criminals — like child predators. But free speech advocates warn the proposed change could usher in an era of Internet censorship.

What Is Section 230 of the CDA?

Section 230 of the Communications Decency Act is one of the most cited United States Internet laws. Passed in 1996, and commonly known as the safe harbor provision, section 230 absolves U.S. website operators from liability if third-parties use their platforms to post defamation statements.

What Do The Attorneys General Want To Change Section 230?

Section 230 of the CDA includes exemptions for federal crimes, allowing national prosecutors to bring charges against website operators in certain cases. Essentially, the AGs simply want those federal rights extended to the state level.

Drug sales, child pornography, and piracy — the attorneys general argue — are the issues at hand, and Section 230 needs tweaking to catch the bad guys.

Why Is There Opposition To The AG’s Proposal?

Americans are serious about our free speech rights. So it should come as no surprise that a group of high-profile legal scholars, associations, and companies signed a letter voicing their displeasure with the AG’s plans for section 230. In the missive, opponents opined “Section 230 has enabled investment in countless revolutionary services that are responsible for a fifth of U.S. economic growth.”

COPPA Parental Consent Rule: Overkill or Necessary?

pictue of mother and daughter at computer to accompany blog post about new COPPA parental consent ruleAs of July 1, 2013, the COPPA parental consent rule is in effect and internet companies aren’t thrilled with the FTC’s definition of “personal information” under the new guidelines.

Tech Community Says COPPA Parental Consent Rule May Thwart Innovation

Some parties fear that smaller operations, like app and plug-in firms, will stop collecting interactive content rather than conform to the complicated parental consent process. Why is this a bad thing? Because begging out could, theoretically, thwart innovation.

FTC’s Stance: We Needed A New COPPA Parental Consent Rule

An FTC spokesperson explained that an increase in deceptive ads aimed at kids necessitated this update. FTC Associate Director Maneesha Mithal claimed that “parents should be in the driver’s seat.”

Tech Industry Weighs In

A non-partisan technology think tank, TechFreedom, hosted a panel discussion on the new COPPA parental consent rule. At the event, its president, Berin Szoka, explained: “The reality is most of the sites and services, like Facebook or Twitter, don’t have an option available for kids.”

Advocates voiced skepticism about the parental consent rule and its effect on advertising and so-called kid-friendly websites. For example, PinewoodDerby.org, a Boy Scouts website, might be affected by the COPPA parental consent rule.

Laws must protect minors, but is the COPPA parental consent rule a recipe for disaster that will create unnecessary innovation boundaries? The debate continues.

Chat With A COPPA Lawyer

Want to make sure you’re COPPA compliant? Contact Kelly Warner Law for an audit. A COPPA violation can cost millions. So, read up on all the COPPA rules to ensure your website, plugin, or app is not lawless!

Instagram Defamation Case: The Game v. The Governess

Will The Game win his Instagram defamation case with the babysitter?
Will The Game win his Instagram defamation case against the babysitter?

The Game is feuding, y’all. This time, he’s beefing with his kid’s babysitter, whom we’ll call *Jane.* The battle ground? L.A. Superior Court. The issue? Instagram defamation.

This tale of social media woe began about a month ago. One day, The Game learned that his boy, Nas, hired caretaker Jane, who had worked at la casa Game; her tenure ignominiously cut short.

On Instagram, Game imputed, “She was busted having sex with her boyfriend and leaving a used condom and the wrapper in my daughter’s room!!!”

Then The Game got graphic. He published a picture of Jane with the caption, “Beware if this person is watching your children, she is a very dangerous baby sitter.” He also posted her Twitter and Instagram handles.

Humiliated and shunned from the Nanny Industrial Complex, Jane decided to move forward with an Instagram defamation case. According to her claim, because of the posts, she’d lost her job and ability to work, which triggered a serious bout of depression.

How To Win An Instagram Defamation Case

To win, Jane, the plaintiff, must prove The Game was lying; or, at least, didn’t engage in proper due diligence before posting the accusations. Plus, she’ll probably have to prove that she never knocked boots in her charge’s bedroom.

If, indeed, The Game was mistaken, he could still escape the legal guillotine by arguing the jocular nature of social media. In other words: Social media is known for overblown smack talk and satire. The average person wouldn’t believe my accusations; so, the statements in question shouldn’t be considered defamatory. It’s a stretch, but it’s worked in the past.

Want to read about more Instagram defamation cases and other social media lawsuits? Head here.