AT&T Mobility

Agency: Federal Trade Commission (FTC)Washington
Description:

On October 8, 2014, the Federal Trade Commission ("FTC") filed a Stipulated Order for Permanent Injunction And Monetary Judgment against AT&T Mobility, LLC ("AT&T") for allegations AT&T participated in deceptive and unfair acts or practices in violation of the FTC Act. The FTC alleges that AT&T billed its customers for hundreds of millions of dollars in charges originated by other companies, usually in amounts of $9.99 per month, for subscriptions for ringtones and text messages containing romance tips, horoscopes, etc. In its Complaint, the FTC alleges that AT&T kept at least 35 percent of the charges it imposed on its customers. The FTC's investigation into AT&T showed that the company received very high volumes of consumer complaints related to the unauthorized third-party charges placed on consumer's phone bills. For some third-party content providers, complaints reached as high as 40 percent of subscriptions charged to AT&T consumers in a given month. According to the Complaint, in October 2011, AT&T altered its refund policy so that customer service representatives could only offer to refund two months' worth of charges to consumers who sought a refund, no matter how long the company had been billing customers for the unauthorized charges. Prior to that time, AT&T had offered refunds of up to three months' worth of charges. The FTC further charged that AT&T did not act to determine whether third parties had in fact gotten authorization from consumers for the charges placed on their bills. In fact, AT&T denied refunds to many consumers, and in other cases referred the consumers to third-parties to seek refunds for the money consumers paid to AT&T.

As part of a $105 million settlement with federal and state law enforcement officials, AT&T Mobility, LLC will pay $80 million to the FTC to provide refunds to consumers the company unlawfully billed for unauthorized third-party charges, a practice known as mobile cramming. The refunds are part of a multi-agency settlement that also includes $20 million in penalties and fees paid to 50 states and the District of Columbia, as well as a $5 million penalty to the FTC. Under the terms of its settlement with the FTC, AT&T must notify all of its current customers who were billed for unauthorized third-party charges of the settlement and the refund program by text message, e-mail, paper bill insert, and notification on an online bill. In addition to the refund requirements, AT&T is also required to obtain consumer's express, informed consent before placing any third-party charges on a consumer's mobile phone bill. In addition, the company must clearly indicate any third-party charges on the consumer's bill and provide consumers with the option to block third-party charges from being placed on their bill. Within seven days of entry of this Order, AT&T must deliver a copy of this Order to all officers and directors of AT&T. One year after entry of this Order, AT&T must submit a compliance report. For twenty years after the entry of this Order, AT&T must create accounting records showing the revenues associated with all third-party charges and retain such records for five years from the date of their creation. The District Court judge signed the Order on October 8, 2014.