Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: FTC charges AT&T with misleading consumers with “unlimited” data promises, (Oct 28, 2014)

By Linda O’Brien, J.D., LL.M.

The FTC announced today that it has charged mobile phone service provider AT&T Mobility with misleading millions of its smartphone customers by charging them for “unlimited” data plans while reducing their data speeds, in some cases by nearly 90 percent. The complaint was filed in the federal district court in San Francisco (FTC v. AT&T Mobility, LLC, File No. 122-3253).

According to the FTC’s complaint, the company failed to adequately disclose to customers on unlimited data plants that, if they reach a certain amount of data use in a given billing cycle, AT&T reduces or “throttles” their data speeds to the point that many common mobile phone applications—such as web browsing, GPS navigation, and watching streaming video—become difficult or nearly impossible to use.

The complaint alleged that AT&T’s marketing materials emphasized the “unlimited” amount of data that would be available to consumers who signed up for its unlimited plans. The FTC stated that, even as unlimited plan consumers renewed their contracts, the company still failed to inform them of the throttling program. When customers canceled their contracts after being throttled, AT&T charged those customers early termination fees, which typically amount to hundreds of dollars.

The FTC alleged that AT&T, despite its unequivocal promises of unlimited data, began throttling data speeds in 2011 for its unlimited data plan customers after they used as little as 2 gigabytes of data in a billing period. According to the complaint, the throttling program has drastically reduced service, often resulting in speed reductions of 80 to 90 percent for affected users. To date, AT&T has throttled at least 3.5 million unique customers a total of more than 25 million times.

According to the FTC’s complaint, consumers in AT&T focus groups strongly objected to the idea of a throttling program and felt “unlimited should mean unlimited.” AT&T documents also showed that the company received thousands of complaints about the slow data speeds under the throttling program. Some consumers quoted the definition of the word “unlimited,” while others called AT&T’s throttling program a “bait and switch.” Many consumers also complained about the effect the throttling program had on their ability to use GPS navigation, to watch streaming videos, to listen to streaming music, and to browse the web. Thousands of customers have submitted complaints about AT&T’s throttling program to the Better Business Bureau, the FTC, and other government agencies. In addition, AT&T has received more than 190,000 customer calls regarding the throttling program.

The complaint charged that AT&T violated the FTC Act by changing the terms of customers’ unlimited data plans while those customers were still under contract, and by failing to adequately disclose the nature of the throttling program to consumers who renewed their unlimited data plans.

“AT&T promised its customers ‘unlimited’ data, and in many instances, it has failed to deliver on that promise,” said FTC Chairwoman Edith Ramirez in a statement. “The issue here is simple: ‘unlimited’ means unlimited.”

The Commission vote authorizing the staff to file the complaint was 5-0.

Companies: AT&T Mobility, LLC.

News: Advertising ConsumerProtection FederalTradeCommissionNews