Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: AT&T settles FTC mobile cramming charges for $105M, (Oct 8, 2014)

By Greg Hammond, J.D.

AT&T Mobility, LLC has settled charges that it engaged in unfair and deceptive billing practices involving unauthorized Third-Party Subscriptions placed on consumers’ accounts. The company will be required to pay a total of $105 million. $80 million will be allocated for customer refunds, $20 million will be paid to participating states and the District of Columbia for penalties and fees, and a $5 million penalty will be paid to the U.S. Treasury on behalf of the Commission (FTC v. AT&T Mobility, LLC, File No. 132 3248, Case No. 1:14-mi99999-UNA).

In its complaint, the FTC alleged that AT&T charged consumers for services offered by third-party merchants, including monthly subscriptions for ringtones, wallpaper, and text messages that provide horoscopes, flirting tips, celebrity gossip, and other information. The unauthorized billing of these monthly fees, which are typically $9.99 per month, is a practice known as mobile cramming. According to the FTC, AT&T retained a portion of each charge paid by consumers, typically as high as 35 percent of the charge, and up to 40 percent of the charge if a subscription had high refund rates. The allegations also stated that, despite complaints about Third-Party Subscriptions, AT&T refused to provide refunds and continued to charge for the subscriptions. AT&T purportedly earned $108 million from Third-Party Subscription charges in 2012, and $161 million in 2013. Consequently, the Commission filed suit, alleging that AT&T’s billing practices constituted deceptive and unfair acts and practices in violation of the FTC Act.

“No one is above the law, including powerful multinational corporations,” reflected New York Attorney General Eric T. Schneiderman. “I am pleased today’s settlement with AT&T Mobility protects consumers against being billed for services they did not request.”

According to the settlement agreement, AT&T will be required to create and implement a system that obtains consumers’ express informed consent prior to being billed for any third-party charge, and the company must further provide consumers with clear and conspicuous disclosures regarding any such charges. In addition, AT&T stipulated to certain refund practices that require the company to conduct training programs for its customer service representatives. Lastly, the stipulated order establishes a redress program, so that $80 million may be refunded to harmed consumers.

“I am very pleased that this settlement will put tens of millions of dollars back in the pockets of consumers harmed by AT&T’s cramming of its mobile customers,” stated FTC Chairwoman Edith Ramirez. “This case underscores the important fact that basic consumer protections – including that consumers should not be billed for charges they did not authorize – are fully applicable in the mobile environment.”

Companies: AT&T Mobility, LLC

News: ConsumerProtection FederalTradeCommissionNews