FTC Goes After T-Mobile USA Over Third-Party Billing

With all of the gains that T-Mobile has made via its disruption, we would only expect that AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ) would try to exploit the negative public relations here. Will this become a PR fiasco? Perhaps, or perhaps not. Time will tell, but T-Mobile US has been targeting AT&T and Verizon directly – so it only seems logical that AT&T and/or Verizon would get this out to the public.

The FTC complaint is alleging that T-Mobile received anywhere from 35% to 40% of the total amount charged to consumers for subscriptions for content such as flirting tips, horoscope information or celebrity gossip that typically cost $9.99 per month. The FTC’s complaint indicates that T-Mobile in some cases continued to bill its customers for these services offered by scammers years after becoming aware of signs that the charges were fraudulent.

Excerpts from bills indicate that ‘Page 1’ hides third party charges. The image attachment in the FTC complaint shows how this appears.

FTC Chairwoman Edith Ramirez said, “It’s wrong for a company like T-Mobile to profit from scams against its customers when there were clear warning signs the charges it was imposing were fraudulent. The FTC’s goal is to ensure that T-Mobile repays all its customers for these crammed charges.”

This third-party billing allegation is one where a carrier places charges on a consumer’s bill for services offered by another company, and the FTC went on to say that the carriers often receive a substantial percentage of the amount charged. If the charges are placed on a bill without customer authorization, it is referred to as “cramming.”

It is hard to know just how many instances this occurred. The term “in some cases” was used multiple times throughout the complaint.

The FTC’s complaint alleges that (again, in some cases) T-Mobile was charging consumers for services that had refund rates of up to 40 percent in a single month. They also signaled that it was an obvious sign to T-Mobile that the charges were never authorized by its customers.

The Commission vote authorizing the staff to file the complaint against T-Mobile was unanimous at 5-0.

FULL FTC COMPLAINT