A Los Angeles digital marketing company scammed "a substantial number" of Angry Birds players through deceptive banner ads, according to a Federal Trade Commission complaint.
Jesta Digital agreed to a $1.2-million settlement with the FTC. On top of that, the company agreed to give refunds to customers who were duped.
The ads targeted the hundreds of millions of Android device owners who use the free version of the mobile game Angry Birds, the FTC complaint said. Jesta ads in the app and other places online said that a virus had been detected on the device. It directed users to click "remove."
"In reality, Jesta did not scan the mobile device and did not detect any viruses," FTC attorney Russell Deitch said.
But people who clicked on the ad and two subsequent screens -- that said “Stop mobile virus now” and then "Subscribe" – were automatically charged $9.99 on their mobile phone bills. People on prepaid plans had the amount deducted from their balance. The FTC also alleged that some users were charged even though they never clicked "Subscribe."
"The message to consumers is that their phone bills won’t make the New York Times best-sellers list, but they should read them carefully," Deitch said. "They should also consider asking their carrier to turn off third-party billing."
In small print at the bottom of the screens, Jesta had warned users that they were actually buying 20 credits to purchase "ringtones and more." Jesta's most well-known service, Jamster, is a marketplace where people can buy ringtones, photos, videos and apps.
At one point, just 372 people out of 100,000 subscribers had actually received some sort of anti-virus app download link, according to a company email cited by the FTC.
According to the FTC, another email from one Jesta executive to another referred to the operation as a scam: "This is something that is important to ... [chief marketing officer of Jesta] since he is anxious to move our business out of being a scam and more into a valued service."
The anxiety may have been spurred by the growing number of consumers who were demanding refunds for the extra charge on their cellphone bills. The FTC noted that T-Mobile threatened to fine or suspend payments to Jesta. In an email cited by the FTC, a Jesta executive suggested asking T-Mobile to match AT&T’s policy of penalizing Jesta only if 18.5% of charges had to be refunded.
"If I got a bill for $9.99/mo and don’t even remember downloading a ... ringtone then I’d be more inclined to make sure I got my money back," the Jesta global marketing director wrote in February 2012, according to the FTC. "Not just that, but they have a stronger case to plead ignorance if they didn’t download anything."
Jesta and its attorney did not respond to requests for comments late Wednesday. But attorney Marc Greenwald told Law.com that Jesta was “pleased” to reach a resolution.
"This one advertising campaign was shut down as soon as Jesta management learned about it," he said. "Jesta’s advertising campaigns are all compliant with or exceed standards set by the Mobile Marketing Assn."
Jesta is required to automatically refund people billed as part of this marketing campaign after Dec. 8, 2011. People charged by Jesta via the number 75555 from Aug. 1, 2011 to Dec. 7, 2011 should contact Jesta at (866) 856-5267 or firstname.lastname@example.org. The company is only obligated to give refunds to people who didn’t use the credits they bought.
The settlement, which still needs court approval, requires Jesta to provide at least two clear notices before charging users through their mobile phone bills. The company must also provide a clear "cancel" button and a phone number at which it can be reached.
The FTC would not say why it began investigating Jesta. The commission did say this was its first complaint directed at what the cybersecurity industry has called "scareware" and the second against a company that "crammed" charges onto cellular service bills.
Jesta Digital is part of Jesta Group, a global investment firm that in 2010 bought Fox Mobile Group from News Corp. and renamed it Jesta Digital. The company's chief marketing officer says on his LinkedIn profile that Jesta Digital has $280 million in annual revenue.
Angry Birds' developer Rovio did not respond to a request for comment.
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