The smartphone warnings looked ominous: "Virus detected," coupled with a robot that looked a lot like the Android operating system logo. Except according to the Federal Trade Commission, the warnings were "a scam" by a company whose own executive in an internal document called its product "a terrible user experience."
The agency sued Jesta Digital LLC in U.S. District Court for the District of Columbia yesterday, charging the company with violating the FTC Act, which bars unfair and deceptive acts. The case immediately settled, with Jesta agreeing to pay $1.2 million to the FTC and issue refunds to “a large number” of consumers.
“Jesta is pleased to have resolved this issue,” said Marc Greenwald, co-chair of Quinn Emanuel Urquhart & Sullivan’s white-collar practice, who represented Jesta. “This one advertising campaign was shut down as soon as Jesta management learned about it. Jesta’s advertising campaigns are all compliant with or exceed standards set by the Mobil Marketing Association.”
Jesta Digital is part of Jesta Group, a global real estate and hospitality investment firm. In 2010, the parent company acquired Fox Mobile Group from News Corp. and renamed it Jesta Digital, headquartered in Los Angeles, Berlin and New York City. Its brands include Jamba and Jamster, which according to the company website, deliver “content, music, games and apps to millions of mobile consumers.”
According to the FTC complaint, Jesta in August 2011 began running banner ads on the free version of the Angry Birds app for Android phones. The ads, which looked more like an official Android notice, claimed that a virus was detected and included a “remove” button.
“Jesta has not scanned the mobile devices before placing these ads. Nor has Jesta actually detected any viruses,” stated the complaint. “Moreover, clicking the ‘remove’ button does not actually remove any viruses from the mobile devices.”
What the company did do was charge consumers $9.99 a month for 20 downloads of ringtones and other items unrelated to virus removal—a fact which was disclosed in tiny print in a spot where most consumers wouldn’t notice, according to the FTC. The charges were added to the consumer’s monthly phone bill.
As for the anti-virus protection, the FTC quotes internal company documents that show only 372 of 100,000 subscribers were actually able to download the anti-virus software.
Many consumers contacted their cell phone providers and asked for refunds, prompting T-Mobile to threaten to fine Jesta or cut off billing.
In an email quoted by the FTC, Jesta’s director of global marketing seemingly did not find the refund requests surprising, writing, “If I got a bill for $9.99/mo and don’t even remember downloading a shitty ringtone then I’d be more inclined to make sure I got my money back. Not just that, but they have a stronger case to plead ignorance if they didn’t download anything. Maybe not directly correlated, but still a terrible user experience.”
As part of the settlement, the company did not admit or deny wrongdoing. The settlement also bars Jesta from making deceptive statements about viruses and anti-virus software, the cost of goods or services, or the conditions of a purchase. Jesta must also receive express verifiable authorization from a consumer before placing any charges on a consumer’s mobile phone bill.