KJ'S BLOG W6: Unethical or Illegal Mobile Marketing Practices

The $5 Million “Cancel Anytime” Lie: What Cerebral’s FTC Settlement Teaches Mobile Marketers About Real Consent

The $5 Million “Cancel Anytime” Lie: What Cerebral’s FTC Settlement Teaches Mobile Marketers About Real Consent. We have written extensively about how various subscriptions are sold via mobile and then how consumers get locked into them while trying to exit them. These “subscriptions” in many cases are first marketed as free trials that automatically convert to paid subscriptions after a time period. Often the time period is as short as days or even weeks. And, as we’ve written extensively before, getting out of paid subscriptions marketed in this way can be very difficult for the subscribing consumer. Here, online mental health provider Cerebral, Inc. has been forced by the FTC to refund $5,029,050 to 40,249 consumers who were continued to be billed after attempting to cancel their subscriptions. Even though the subscriptions in this case were for telehealth, all of the same lessons for other industries will apply. First, as I recently noted in comments to Direct Marketing News on soliciting phone numbers by SMS (text messages) for marketing purposes and then sending marketing solicitations to those phone numbers, treat your customers’ “no” the same as you would an FTC lawyer’s “”no”—honor it immediately.

What specific mobile marketing law was violated?

Again, there is no particular law at issue here, but there are obviously a number of circumstances in which a company would be sending SMS solicitations for subscription offers such as weekly coupons for coffee. In such cases, the solicitation must contain a clear statement of how the recipient can opt out of future messages, and the marketer must honor opt-outs in all subsequent communications to that phone number, regardless of medium. In the case of SMS marketing, that would mean that the marketer must immediately honor a request to stop (opt-out) in all future communications to that number, even if the request to stop is sent via reply to the solicitation in question. Therefore, “slow-walking” a customer’s attempt to cancel his or her subscription would subject that marketer to the same penalties as if he or she acknowledged the opt-out and then proceeded to send communications to that customer for three days.

What are the negative consequences to the consumer?

There are also very real ramifications to both a marketer’s and their customer’s finances as well as anxiety and stress, as the marketer can be attempting to assist customers with treatment for their anxiety and/or depression. The disclosure of a customer’s health information by a telehealth provider to third-party advertisers such as TikTok or Google would likely be considered to be a very severe breach of trust in and of itself. Such information as a customer’s location as well as the content of their text messages on their phone can be very valuable to a data broker and could result in severe financial loss as well as be used for identity theft, stalking, etc. It could also simply make a customer uncomfortable knowing that their phone is aware of so much information about them.

What are the possible penalties levied on a company for violating legal considerations?

The FTC settlement requires Cerebral to refund $5,029,050 to 40,249 consumers with an average reimbursement of $125 each. Additional funds may be required to be reimbursed to other consumers as part of the proposed settlement. Under ROSCA, the FTC is entitled to up to $50,120 per violation. Thus, had Cerebral solicited thousands of subscriptions from consumers attempting to cancel their subscriptions, the online telehealth marketer could have potentially been liable for up to $200,000,000. For the next 10 years, as part of the proposed settlement, Cerebral will ensure that the following is in place: (1) a straightforward process to allow customers to cancel their subscription in one click as opposed to having to call or email to cancel; (2) do not make any false “cancel anytime” promises to consumers; and (3) do not disclose health information of customers to third parties (e.g., to advertisers such as TikTok or Google) without prior consent from the customer. The penalties for similar type of violations by marketers conducting campaigns via other channels would be equally egregious (e.g. CAN-SPAM Act – up to $53,088 per violation; TCPA – up to $500 per unsolicited text or $1,500 per unsolicited call). It is not worth a marketer’s or marketer’s business time and resources to ignore opt-outs for one week.

What actions must a marketer take in relation to any mobile marketing campaign to act ethically?

For marketers attempting to abide by all of the abovementioned laws and generate optimal customer experiences, following these few steps should lead marketers to meet their goals for both aforementioned criteria. First, when soliciting for phone numbers in order to add consumers to a list of current subscribers (i.e., weekly coffee coupons via SMS), include necessary information in solicitation messages regarding consumers’ ability to opt-out of future messages via SMS sent to acquired phone numbers. Additionally, marketers who solicit consumers’ phone numbers for reasons other than adding said consumers to a list of current subscribers must honor requests for said marketers to stop (i.e., opt-out) in all future communications to the aforementioned phone number(s) and must do so immediately.

A practice known as “slow-walking” a consumer’s cancellation of a service would no doubt result in poor customer experiences for the aforementioned reason mentioned in the first sentence of the above paragraph as well as aforementioned penalties incurred by the company practicing “slow-walking”. Furthermore, when charging customers for services and/or acquiring the phone numbers of consumers in reference to the aforementioned services and/or offers, fully disclose all material aspects of any given service and/or offer to all customers acquiring said services and/or offers before the aforementioned have been charged and the aforementioned phone numbers of the customers have been acquired. The aforementioned material terms of services and/or offers need to include ways in which customers are able to cancel the aforementioned acquired subscriptions, how much (if any) the charge for acquiring a customer’s phone number and/or the aforementioned charge(s) for any given service(s) and/or offer(s) in which customers have acquired said service(s) and/or offer(s). Last but not least, fully disclose the amount of time required to process any of the aforementioned cancellations for acquired subscriptions.

Obviously, if a company were to state that any given customers could cancel any given services and/or offers at “any time” and customers acquiring said services and/or offers found that they could not in reality in fact cancel said services and/or in fact aforementioned ways (i.e., having to jump through hoops for a week), it would result in said customers experiencing extremely negative customer experiences and the aforementioned company incurring penalty or penalties for said extremely negative customer experiences incurred by said practices. As stated before, avoid the collection, sale, or distribution of any and all highly sensitive information, especially information that is deemed to be highly sensitive to location information and information pertaining to the content of text messages on customers’ phones. Last but not least, as stated before, obtain granular consent from customers before collection and/or distribution of information that has been collected from said customers in the first place. Audit all of the aforementioned processes as a secret shopper attempting to cancel subscriptions. If a company takes more than two clicks to cancel any given acquired subscription(s), the aforementioned company clearly is attempting to practice a very illegal mobile marketing practice(s) in order to incur a penalty or penalties.