After 4 long years in litigation, Plaintiffs have finally settled their lawsuit with NBC over premium text messaging charges. Having likely spent millions in legal fees, the settlement fairly well recites the law any first year associate could have noted: a free method of entry does not save a pay-to-play entry where you are paying for a chance to win. The California courts did not actually rule on this issues, but the terms of the settlement make clear that things were headed in that direction and – at least for the time being – companies should not charge consumers to enter using their mobile phones, even if there is an alternate method of entry.

Under terms of the settlement, consumers who paid 99 cents to enter a sweepstakes via their mobile phone (the free method of entry was using the computer), may submit a claim for a refund. The Plaintiffs will also receive $5.2 million. Finally, the defendants agreed to a 5 year injunction from offering a promotion where people who enter using the Premium text messaging method will not receive something of value. Presumably, NBC figures the law will change by then. We’re not so sure.

Practice Note: This case follows on the heels of a line of cases known as the “phone card” cases wherein people were given a chance to win a large cash prize if they bought a calling card (there was also a free method of entry). The problem was, the price for the calling card was outrageously high for the number of minutes a consumer received, making it clear people were merely buying a lottery ticket. Clients should be advised that the pay-to-play method of entry must confer something of reasonable value to the consumer.



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