The Hidden Danger of Text Message Marketing

Keeping the lawyers at bay used to be a whole lot easier for dealerships. Unfortunately, new technology brings new challenges. A recent high-profile lawsuit involves a large dealer group named in a class-action lawsuit for allegedly failing to honor a text message opt-out request. The suit, launched by a former employee, is seeking damages of at least $500 for each violation. While this may seem like yet another frivolous lawsuit by a disgruntled former employee, the potential for liability to this dealer group is substantial. Several recent text message cases have resulted in multi-million dollar settlements. For instance:

Twentieth Century Fox - $16 million class-action settlement ($200/ phone number)

Simon & Schuster - $10 million class-action settlement ($175/ phone number)

Timberland Company - $7 million class-action settlement ($150/ phone number)

Text (SMS) marketing is subject to a number of federal and state restrictions and the rules are extremely confusing. These regulations can be much more difficult to deal with than telemarketing or email regulations - primarily because many consumers are charged for text messages and the government feels that they should be afforded additional protection against unwanted solicitations. In many cases, the consumer must opt-in (give express permission) before you can legally send them a text message, even if you have an existing relationship with them.

Here are some things you should know before launching a text marketing campaign:

1. You can’t send a commercial text message (solicitation) to a phone number that’s on the national “Do Not Call” (DNC) list (subject to the “established business relationship” and other provisions of the national DNC rules).

2. You can’t send a commercial text message to a phone number that is on your company-specific DNC list.

3. You can’t send any text message whatsoever to a cell phone number – including sales pitches, service reminders, and communications with current customers - using an “automated dialer system” unless you have the consumer’s prior express consent. This may include computers used to send automated text messages (yours or your vendors).

4. In some instances, a text message may also be considered an email and must comply with all of the standard CAN-SPAM requirements (contains your physical mailing address, cost-free opt-out mechanism, etc.). A text message will be considered an email if is sent to an email address – that is, if it has an internet domain name after the "@" symbol (for example: sending a message from your computer to a mobile carrier, such as 10digitmobilenumber@txt.att.net).

5. The CAN-SPAM Act also prohibits sending commercial e-mail messages to wireless devices without prior permission. So, no commercial text message that is deemed to be an email may be sent to a wireless device without express prior authorization. Merely having an "established business relationship" with the recipient is not enough.

Confused yet? Here are some suggestions to help protect yourself against legal challenges:

• Consult your company-specific DNC list before sending a text message.

• Consult the national DNC list and consider whether your messages are based on an "established business relationship," which may provide an exception from the national DNC compliance.

• Determine whether your delivery meets the CAN-SPAM Act’s "email" definition, and if so, whether you have complied with the CAN-SPAM disclosure and opt-out requirements.

• Put a process in place to ensure that all opt-out requests are honored quickly and permanently.

• Develop an employee policy regarding text messaging and educate your staff on proper procedures.

• Appoint an in-house compliance coordinator to monitor text messaging by both employees and vendors.

• Consider instituting a policy of ALWAYS obtaining recipients’ express prior authorization before sending text messages, regardless of the circumstances or method of delivery.

• Always consult knowledgeable legal counsel before launching a text marketing campaign.

• If you use an outside vendor to administer your text marketing campaigns, NEVER assume that they know all the rules and regulations - run it by your legal team first. If you’re writing the check, you’re responsible.

I know - it’s mind-boggling how difficult it can be to deal with these regulations. But just remember - it only takes one consumer (or one employee) to get the legal ball rolling, and it’s certainly not difficult to find a lawyer who’s ready, willing, and able to sue a car dealer.

Is That IPad Giveaway Legal?

Sweepstakes, contests, and giveaways have become increasingly popular among dealerships. These promotions can be a great way to get word out about your company, increase your social media presence and develop leads. However, entry into a poorly considered sweepstakes or contest can be a trap for the unwary dealer. These promotions are governed by a variety of federal and state laws as well as social networking sites’ terms of service. The FTC receives thousands of complaints from consumers each year regarding the abuse of contest promotions. Failure to follow pertinent statutes and regulations regarding promotions can lead to government inquiries, civil enforcement actions, adverse publicity, and even criminal penalties.

Following is a basic overview of the guidelines for running lawful promotions, but you should always consult knowledgeable legal counsel before starting a campaign. And remember, it’s dangerous to assume that outsourcing responsibility for the promotion to a marketing firm or other service provider will result in a legal compliance. Understanding the rules and running your promotions by your legal team can guard against potential problems and may help shield the dealership from liability.

So, what’s the difference between a contest, sweepstakes and lottery? A "contest" offers prospective participants the opportunity to receive or compete for gifts or prizes on the basis of skill or skill and chance, and which is conditioned wholly or partly on the payment of some value. A "sweepstakes" is any procedure for distributing anything of value by chance (e.g., a drawing). The main differences between a sweepstakes and a contest are that the contest participants must use at least some skill to win the prize and may pay some value to participate in the contest while sweepstakes participants win solely by chance and are not required to pay value.

To avoid classification as a lottery, which is generally illegal unless run by the state, a sweepstakes promotion must not require an entrant to pay or promise to pay value for the chance to win the prize. This is known as consideration. The most easily identified or typical form of consideration is a requirement of a purchase or payment to enter the sweepstakes. However, in some states consideration may also be found to exist when an entrant must exert substantial effort or time to participate in the promotion. For example, completing a simple entry form or “liking” a page may not be considered steps that involve consideration, but requiring an entrant to fill out a lengthy marketing questionnaire might constitute substantial effort. These determinations vary from state to state, so it’s advisable to get a legal opinion.

The operator of the sweepstakes must treat entries that are not accompanied by orders the same as entries that are accompanied by orders. In other words, someone who purchased a car cannot be more likely to win a prize then someone who didn’t.

Each state has a different set of laws governing promotions, and some states require that sweepstakes offering prizes over a certain value to be registered. This amount can be as low as $500 (Rhode Island). Attention to the rules in all jurisdictions where the promotion will be available is essential.

Many states have passed specific laws or regulations that identify information that must be disclosed to potential entrants. Generally, such disclosures contain a “no purchase necessary” statement, an explanation of entry procedures, the identity of the company conducting the promotion, eligibility requirements, prizes and their estimated value, method of determining a winner, the odds of winning, the beginning and ending dates of the contest, and where a winners list may be obtained. These disclosures must be clear and conspicuous (and that doesn’t mean “see dealer for details”).

To conduct a promotion through a social networking site, a company should comply with the particular site’s terms. For example, Facebook has very specific criteria for running promotions: http://www.facebook.com/promotions_guidelines.php.

So, go ahead and give away that IPad - just be sure to dot your ‘I’s and cross your ‘T’s.