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Premium text message provider banned as company director

News Release issued by the COI News Distribution Service on 09 December 2011

The director of a premium text message information provider has been disqualified from acting as a company director, managing or in any way controlling a company for five years, following an investigation by the Company Investigations team of The Insolvency Service.

Oisten Jakob Mathiesen, now living in Spain, was the sole director of SMS Digital Future Limited throughout the life of the company.

Between February 2007 and November 2008, the company operated a premium rate auction subscription service. Participants bid for electronic goods through a series of text messages sent to their mobile phones, from mobile phone numbers known as short-codes, and networks provided by a number of service providers.

The investigation by The Insolvency Service found that SMS Digital Future had reversed the premium rate mobile phone charges so that participants paid the rates, causing the company to breach the industry Code of Practice. Some recipients of the text messages had also not opted into SMS Digital Future's text message auctions, yet were sent the text messages and charged at a premium rate by their network operator.

After receiving 185 complaints from the public relating to the operation of SMS Digital Future's auctions the industry regulator, PhonepayPlus conducted investigations into the operation of SMS Digital Future's auctions.

This culminated in three tribunal decisions, which found that SMS Digital Future had knowingly or wilfully sent out misleading, unsolicited promotional text messages in breach of the industry's Code of Practice relating to 'legality'. The tribunal imposed formal reprimands and levied fines totalling £350,000 on SMS Digital Future and the service providers.

Investigations by the Insolvency Service found that Mr Mathiesen's actions had breached the industry's Code of Practice and disqualified him from acting as a company director.

Commenting on the case, Claire Entwistle, Director of Company Investigations (North) of The Insolvency Service, said:

"All businesses must observe the law or they will be punished. The industry Code of Practice was put in place to protect the public from businesses that attempt to use new technologies for their own ends with a careless disregard for the required procedures when marketing text message services to consumers. Mr Mathieson flagrantly and repeatedly breached this Code.

Ins/Coms/209


Ends Notes to editors
1. Mr Oistein Mathiesen was a director of SMS Digital Future Limited from its incorporation on 25 June 2002 to its liquidation on 06 March 2009.

2. On 28 November 2011, Mr Oisten Mathiesen signed a Director Disqualification Undertaking banning him from being a director of a company for a period of five years. The undertaking was accepted by the Secretary of State on 01 December 2011, and the period of disqualification will commence on 22 December 2011.

3. Recipients of SMS Digital Future's text message auctions were charged for most of the text messages received from SMSDF without any further action on their part, in a process known as reverse-billing. This is perfectly proper provided that recipients opt into the service; indeed, many news and sports SMS subscription services operate in this way. However, some recipients of SMS Digital Future's text messages did not opt into receiving the messages.

4. PhonepayPlus is the regulatory agency for premium rate services in the UK. Its Code of Practice has been approved by Ofcom. For further information see http://www.phonepayplus.org.uk.

5. It is against paragraph 5.2 of Eleventh Edition of the Code of Practice 2006, as amended April 2008, and is against the law [Regulation 22 of the Privacy and Electronic Communications (EC Directive) 2003], to send unsolicited promotions using electronic mail (including text messages) for direct marketing purposes, either where the recipient has not specifically consented to receiving such promotions, or where the recipient's details were not obtained whilst purchasing a similar or related product or service to that being promoted.

6. The Insolvency Service administers the insolvency regime investigating all compulsory liquidations and individual insolvencies (bankruptcies) through the Official Receiver to establish why they became insolvent. The Service also authorises and regulates the insolvency profession; deals with disqualification of directors in corporate failures; assesses and pays statutory entitlement to redundancy payments when an employer cannot or will not pay employees; provides banking and investment services for bankruptcy and liquidation estate funds; and advises ministers and other government departments on insolvency law and practice. Further information about the work of The Insolvency Service is available from www.bis.gov.uk/insolvency

7. Media enquiries should be directed to: Ade Daramy, Press Officer on 020 7596 6187

Contacts:

Insolvency Service
nds.insolvencyservice@coi.gsi.gov.uk

Ade Daramy
Phone: 020 7596 6187
ade.daramy@insolvency.gsi.gov.uk