A company charged with fraud by Verizon and the Texas attorney general is fighting back, asking an Arizona court on Monday not to impose an injunction that would shut down its business.
Verizon has accused the company, Jawa, of duping people into paying around US$10 a month for short message services they didn't ask for.
In a legal filing opposing the injunction Monday, Jawa argues that Verizon can't charge it with fraud because Verizon isn't a consumer of its services, and because Verizon can't identify any customers who were charged without their permission.
It also argues that Verizon should not be able to enforce its policies against companies that operate nationwide, such as Jawa, because the U.S. Federal Communications Commission and Federal Trade Commission are the proper bodies for regulating nationwide text services.
Verizon, in its original lawsuit, said it doesn't know which of its customers may have signed up through Jawa websites. It claims Jawa hides details about recurring charges in violation of Verizon's policy, which requires that users have to opt in twice for such services.
AT&T has launched an investigation into Jawa but other operators, apart from Verizon, do not appear to have taken action.
"We have retained a nationally recognized cyber fraud expert team to investigate," AT&T said in a statement. "Jawa has agreed to cooperate by allowing these independent investigators full access to data and records. In the interim, we have suspended the short codes identified in the complaint, and have identified and suspended additional related short codes."
The codes are short phone numbers that users send a text to in order to sign up for messages with information such as sports scores, recipes and movie times. The codes are administered by the CTIA mobile trade group so that they will work across operators.
T-Mobile did not reply to a question about whether it was looking into Jawa. Sprint said it has not initiated any litigation against the company.
Verizon has had trouble with the owners of Jawa in the past. The operator said it first discovered that a company called Cylon, owned by the CEO of Jawa, Jason Hope, wasn't complying with Verizon's terms for offering premium text services. As a result, Verizon suspended Cylon.
However, Verizon said Hope and his partner came up with a way around the suspension. They set up a new company each time they leased a short code and launched a campaign so that the operator didn't know the campaign was affiliated with Hope, Verizon alleges.
Verizon has set up a Web page where customers can file for a refund if they have been charged for the services without signing up for them.
A blog for software startups in Arizona, AZ Disruptors, has been following the case, which appears to be attracting some interest in Scottsdale, where Jawa is based.
A hearing about the proposed injunction is set for April 13 in the U.S. District Court for the District of Arizona. A similar lawsuit was filed by the Texas attorney general and is being handled by a district court in Travis County, Texas.