The Federal Trade Commission has charged DirecTV with deceptively advertising discounted 12-month packages of service, suggesting its "ditch cable" campaign also ditched some of the facts. DirecTV says the FTC is "flat out wrong."
FTC said DirecTV, in asking consumers to ditch cable and switch to DirecTV (notably those Rob Lowe ads where cable is portrayed as creepy and unseemly), failed to disclose that the 12-month package requires a two-year commitment. The FTC alleged the satellite operator was tricking consumers into making the switch.
It also said DirecTV did not disclose that the cost of "up to $19.95" pricing in the offer goes up by as much as $45 per month in the second year.
"DIRECTV also fails to disclose that its offer of free premium channels for three months is in fact a negative option continuity plan that requires consumers to proactively cancel to avoid automatic charges on their credit or debit cards, the FTC alleged in its complaint.
Jessica Rich, director of the FTC's Consumer Protection bureau, said consumers were not able to make an informed choice because DirecTV did not give it to them.
"The companies tell consumers to ditch cable and switch to DirecTV to save money" with ads promoting low prices for 12 months, she said, but instead it "tricked" consumers into buying satellite TV packages with a 24-month commitment, with "drastic" price escalations in the second 12 months and early cancellation fee of up to $480 dollars.
"Companies can't hide important information from consumers to trick them into buying goods and services, and that's what we allege DirecTV did."
“DIRECTV misled consumers about the cost of its satellite television services and cancellation fees,” said FTC Chairwoman Edith Ramirez in a statement. “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 FTC's decision is flat-out wrong and we will vigorously defend ourselves, for as long as it takes," DirecTV said in a statement. "We go above and beyond to ensure that every new customer receives all the information they need, multiple times, to make informed and intelligent decisions. For us to do anything less just doesn't make sense."
The FTC is seeking a court order permanently barring DIRECTV from engaging in the allegedly illegal conduct, as well as a monetary judgment to refund consumers.
While a reporter on a conference call about the action pointed to some fine print on the DirecTV web site citing the 24-month contract, the FTC said some fine print disclosures did not trump the larger claims it said were meant to decieve.
The FTC did not set a figure on the monetary element--which will be determined in litigation--but said a ballpark fiogure would be in the many millions of dollars, including consumers who went ahead and paid he escalating price of $25-$45-per-month more in the second year, or those who paid the cancellation fee.
The complaint was lodged in the U.S. District Court for the Northern District of California, San Francisco Division. The vote to approve the complaint was 5-0.
The FTC has filed a complaint against DirecTV in the past over alleged do not call violations, and is currently in litigation with Dish for telemarketing and do not call violations.
Consumers Union applauded the FTC's move, taking the opportunity to tweak the satellite operator over its TV ad campaign.
“You can just imagine the TV ad: ‘I’m Rob Lowe, and here’s the price you’ll pay for DirecTV. And I’m Hidden-in-the-Fine-Print Rob Lowe, and we’re actually going to jack up your bill," said Delara Derakhshani, policy counsel for Consumers Union.
“DirecTV tells you you'll pay a certain price, without being upfront about the big price hike and the two-year commitment in store for you. You can’t get out of the deal without paying hefty penalties. This was not an isolated incident. The FTC complaint details how these problems with DirecTV have been cropping up for years."
“We’re glad the FTC is going after these kinds of deceptive and misleading offers."