Legal Niches

Has The 9th Circuit Raised The Bar For Text-Message Affiliate Marketing?

Did text-message advertising get more difficult after last week's decision by the U.S. Court of Appeals for the Ninth Circuit in Satterfield v. Simon & Schuster, Inc.? Perhaps so, but not principally for reasons cited by many accounts and commentators reporting on the case.

Satterfield, the recipient of a text-message advertising a Stephen King novel sent by its publisher as part of an outsourced promo campaign, sued Simon & Schuster (and outsourcer ipsh!) under the Telephone Consumer Protection Act ('TCPA'), which prohibits (among other things) 'calls' to numbers assigned to cellular and similar services sent by automatic telephone dialing system (or 'ATDS'). Simon & Schuster defended on grounds the ad was not delivered by an ATDS as defined by statute, and that text messages are not 'calls' as the TCPA requires. It also claimed the text fell under the law's consent exception insofar as Satterfield received it after registering at Nextones.com (to allow her minor son to receive a free ringtone), where she agreed to terms and conditions ('T&Cs') that included accepting on the registered cell phone promotions from the website's affiliates and brands. Initially, Satterfield was turned aside on summary judgment when the trial court held the text was not sent by an ATDS and that Satterfield consented to its receipt (and thus did not reach arguments that text messages are not 'calls' under the TCPA).

Last week, the Ninth Circuit reversed. It found, given dueling expert testimony, a material fact question that needed to be tried, as to whether the equipment that sent the text was an ATDS. It also held, based on Federal Communications Commission ('FCC') pronouncements, and on the law's legislative history and intent, that text messages are 'calls' under the TCPA. This part of the decision became the headline in much reporting and commentary on the case, not to mention speculation about what it means to marketers. But classifying text messages to phone numbers as ATDS transmissions is hardly news – the FCC said they were over five years ago, and reiterated as much in adopting rules under the CAN-SPAM Act (which govern mobile service commercial messages to email addresses, which differ from text messages to phone numbers), so that question was never in serious doubt. Rather, the more intriguing aspect of the Ninth Circuit's decision (in my view), which received less attention, comes in its last few pages.

There, the court rejected claims that the text-message was allowed based on consent Satterfield gave at the Nextones' website to receiving promotions from its affiliates and brands. Rather than viewing who could be an 'affiliate' of Nextones in more colloquial terms – which is the tone for which many online T&Cs and privacy policies strive to make them more consumer-friendly – the Ninth Circuit construed 'affiliate' as having 'independent legal significance' so as to require a corporate relationship between the entities 'by shareholdings or other means of control.' Since Nextones and Simon & Schuster are not commonly controlled, the court reasoned, the publisher could not be an 'affiliate' of Nextones from whom Satterfield consented to receive texted ads. The court took a similarly narrow view of 'brands,' holding they are 'commonly defined' as 'goods identified as being … of a single firm,' so since the text message advertised a product of Simon & Schuster, not Nextones, consent did not exist on this basis, either.

The decision thus begs the question how a company's website (and other peripheral materials) must identify third-parties who may market to the company's consumers, in order for consent, such as that contemplated by the TCPA, to encompass third parties. If describing them as 'affiliates' will not suffice – and, one would think, the prospect exists of courts like the Ninth Circuit imposing legally-specific definitions on, or finding equally insufficient otherwise, other commonly used colloquialisms such as 'partners,' 'clients' or 'co-marketers' – how are companies to describe such third-party marketers in a way that is both understandable and succinct, while still being meaningful to consumers? That, I believe, is among the principal challenges facing marketers in the wake of the Ninth Circuit's Satterfield decision.
 

Full post as published by The Privacy and Security Law Blog on June 24, 2009 (boomark / email).