AT&T to Pay Florida AG $2.5 Million, Investigations of Other Carriers Are Set

As it previously hinted, the Florida Attorney General’s CyberFraud Task Force has nabbed a big one this time: AT&T Mobility.

The wireless firm has agreed to cough up $2.5 million to the AG’s office in addition to refunding customer payments for ringtones and other cellphone content advertised as free. In its aim to safeguard Florida consumers against misleading online ads promoting “free” ringtones that actually require payment, the task force also is launching investigations of Verizon, Sprint/Nextel, Alltel and T-Mobile.

AT&T also must pay an additional $500,000 to be used to educate consumers about safe Web use.

Smaller carriers are next, according to the AG’s Office. “We are taking a top-down approach and trying to get the largest cell phone companies on board so as to be able to effect the most widespread change in the shortest period of time,” Sandi Copes, press secretary for Florida’s Office of the Attorney General told ClickZ News. “Once we get the largest cell providers to comply with these new standards, we will begin with the smaller carriers,” she continued.

The Task Force also is conducting civil investigations of Think Partnership, Intermark Media, Traffix and others for allegedly deceptive online ad practices.

“In the mobile marketing sector, the carriers are the ones who control the entire ecosystem,” said Don Mathis, president of AzoogleAds, a firm that agreed to pay $1 million to the Florida AG’s office in November following an investigation into the company’s alleged deceptive online ad practices.

“We’re hoping this agreement represents the fact that they’re committed to doing the right thing… and disallowing the illegitimate players to get short codes,” added Mathis. Short codes are short numbers that essentially enable billing by carriers for mobile product charges. As part of its agreement with the AG’s office, AzoogleAds has worked with the task force in other investigations involving misleading online advertising.

AT&T spokesman Marty Richter wrote in a statement, “Since the mobile content business took off a few years ago, AT&T has taken aggressive action to put industry-leading safeguards in place to protect our customers when they are considering purchasing downloadable options such as ringtones, wallpapers, games or other content. Said another way, our goal is no surprises.”

According to Richter, AT&T has complied with “virtually all the terms” of the Florida agreement “for some time.”

The involvement of such a large and well-recognized brand as AT&T marks a milestone in the task force’s aggressive pursuit of companies it believes have harmed Florida residents. Thus far, the AG’s office has focused on lesser-known marketing firms that have used Web ads to promote mobile content offers, including AzoogleAds and World Avenue. In those cases, the companies were investigated for unfair and deceptive trade practices relating to Web ads leading some consumers to unwittingly register for ringtone subscription plans that were automatically billed to their cell phone accounts.

In a talk with ClickZ News earlier this month, Florida Attorney General Bill McCollum signaled that the Task Force had been investigating companies with “household names” allegedly involved with deceptive mobile content marketing. His office has a Fraud Hotline number it promotes to Floridians.

The Florida task force suggested its agreement with AT&T could set a precedent. Indeed, the department plans to use it as a template for future investigations. A unique and primary component of the agreement is the requirement that AT&T enforce standards for ads placed by or for partners providing mobile content. Similar to the agreements with AzoogleAds and World Avenue, AT&T now must ensure those ads clearly and conspicuously disclose the actual cost of mobile content.

“The implementation’s a giant question,” said Azoogle’s Mathis when asked how a carrier like AT&T might monitor ads from third party partners.

According to the agreement, AT&T and former Cingular Wireless customers can request refunds for mobile content, even if they are not current customers of those firms. AT&T Mobility was previously known as Cingular Wireless.

AT&T must stipulate the new ad standards in its contracts with billing aggregators and content providers. The carrier has agreed to stop billing consumers for charges from partners that don’t abide by the new rules.

“Those rogue content providers or affiliates who decide to continue to deceive consumers by using misleading advertising will not only find themselves in the crosshairs of the Attorney General’s sights, but perhaps more importantly, they will lose their ability to derive revenue from their actions because AT&T will no longer bill on their behalf,” stated Copes.

Like AzoogleAds and World Avenue, AT&T has agreed to aid other similar investigations, and, according to Copes, “will also partner with the AG to ensure that those content providers and affiliate networks who are noncompliant are shut down.”