Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: FTC charges DIRECTV with deceptive advertising, (Mar 11, 2015)

By Linda O’Brien, J.D., LL.M.

The FTC has charged DIRECTV, the country’s largest provider of satellite television services, with deceptively advertising a discounted 12-month programming package, the agency announced today. The company advertised discounted monthly prices and failed to tell consumers about a two-year contract obligation, significant price increases in the second year, or the need to cancel “free” premium movie channels (FTC v. DIRECTV, File No. 102-3141).

DIRECTV is a national provider of direct-to-home satellite television services, based in El Segundo, California. With more than 20 million subscribers across the United States, the company is the largest provider of such multi-channel video programming distribution in the nation. The company offers its services to consumers through subscriptions, and typically requires users to agree to a 24-month contract that includes a programming package, satellite dish, other necessary equipment, and installation and support services.

According to the FTC’s complaint, in many instances since 2007, DIRECTV violated the FTC Act by making deceptive claims or omissions of material facts in advertisements and on its website for its satellite television subscription service. Specifically, the FTC charged that DIRECTV promotes its television service and programming package prices “for 12 months,” without clearly and prominently disclosing that these deals require consumers to sign a two-year contract (with a substantial early cancellation fee) and that the cost of the programming packages jumps $25 to $45 a month in the second year of the contract.

The FTC also alleged that DIRECTV represents that consumers will receive premium channels, such as HBO and Showtime, “free for 3 months,” without adequately disclosing that: (1) consumers will be enrolled in a negative option continuity plan that charges for the premium channels after the trial period; (2) consumers must contact DIRECTV to cancel the plan before the trial period ends to avoid incurring the charges; (3) DIRECTV will use consumers’ credit or debit card information to charge them after the trial period ends; and (4) there are specific costs associated with the negative option continuity plan.

In addition to the agency’s charges that DIRECTV violated the FTC Act, the FTC alleged that the company violated the Restore Online Shoppers’ Confidence Act (ROSCA) by failing to clearly and conspicuously disclose on its website all of the material terms of offers with a negative option component.

In filing its complaint, the FTC is seeking a court order that permanently bars DIRECTV from engaging in the allegedly illegal conduct, as well as a monetary judgment that could be used to provide refunds to affected consumers.

“DIRECTV misled consumers about the cost of its satellite television services and cancellation fees,” said FTC Chairwoman Edith Ramirez. “DIRECTV sought to lock customers into longer and more expensive contracts and premium packages that were not adequately disclosed. It’s a bedrock principle that the key terms of an offer to a consumer must be clear and conspicuous, not hidden in fine print.”

The complaint was filed in the U.S. District Court for the Northern District of California in San Francisco.

Companies: DIRECTV; DIRECTV, LLC

News: ConsumerProtection FederalTradeCommissionNews