FTC on Watch Against Wireless Ripoffs

Cellphone Service Providers Warned to Keep It Honest, or Else

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WASHINGTON (AdAge.com) -- An FTC commissioner warned cellphone content providers they need to do a better job of disclosing the costs consumers incur when clicking or downloading services for their mobile devices.

Speaking yesterday at the start of a two-day Federal Trade Commission forum on mobile devices, the commissioner, Jonathan Leibowitz, said the FTC intends to step in to take enforcement action against deceptive or unfair content offers.

Mr. Leibowitz said that messaging, games and video services marketed to children and teens are a particular concern because of young people's eagerness to adopt new technologies. "Kids are usually more facile and fearless with technology than their parents -- quick to click first and ask questions later," he said. "A mobile phone that gives them easy access to content and purchasing power makes them easy prey for aggressive marketers," he said.

As an example, Mr. Leibowitz pointed to SMS text-messaging offers from marketers that do not clearly disclose the costs for using the service, but he made clear he had broader concerns.

"We believe in self-regulation, but we are going to police the wireless space," he warned.

Privacy also a concern
The Center for Digital Democracy and the U.S. Public Interest Group announced at the two-day workshop they will formally petition the FTC to probe privacy issues in the mobile space. The two consumer groups in 2006 requested a similar probe of web services.

Jeff Chester, executive director of the Center for Digital Democracy, said he was worried both about mobile devices' appeal to children and teens and about the new possibilities they offer to track where consumers travel. He said the possibility for developing detailed consumer behavior profiles should prompt the FTC to set some limits.

"The FTC cannot repeat the mistake it made for the web. It's time for initiative," he told the workshop, explaining that the FTC had failed to act sufficiently to limit profiling of web surfers.

The FTC workshop is part of the agency's effort to track developments in mobile commerce so it can anticipate and act on developing consumer-fraud problems.

Opposed to new regulations
Marketers, analysts and media companies told the workshop that the mobile market is finally becoming a platform for commercial services, after a long delay, but the lack of research on what works still makes mobile's effectiveness somewhat uncertain. They urged the FTC not to take action to regulate the developing market before problems emerged.

"Where are we as a company? We are still on a test-and-learn phase," said Jean Berberich, digital marketing innovation manager for Procter & Gamble. "We are still trying to figure what it is about it that consumers find valuable."

She said a P&G CoverGirl effort aimed at the mobile market indicated that consumers were more interested in using phones for help -- in CoverGirl's case, the right color for cosmetics -- than in contests or giveaways.

Benjamin Ezrick, senior strategist of digital innovation at Ogilvy Interactive, noted how fast things are changing, calling Apple's iPhone a "game changer." He said M:Metrics data showed that people who buy one expand their use of web browsing by 85%.
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