The FTC announced that it has filed suit against DirecTV, the nation’s largest satellite television provider, alleging that DirecTV deceived consumers regarding the cost of DirecTV’s two-year service promotion. According to 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.” During a conference call following the press release, a spokesman for the FTC said that a “substantial portion” of DirecTV’s more than 20 million subscribers in the United States were affected. Jessica L. Rich, director of the FTC bureau of consumer protection, also said the FTC was seeking millions of dollars in refunds for DirecTV subscribers.
The FTC’s complaint alleges DirecTV, in many instances since 2007, deceived its customers by introducing to consumers a one-year subscription starting at $19.99, without adequately disclosing that the offer required a two-year contract, with increasing monthly costs and a hefty cancellation fee. The FTC further alleges DirecTV told subscribers they would get premium channels such as HBO and Showtime free for three months but has not adequately disclosed that they must cancel the channels before the trial period ends or they would have their credit card charged. In addition to the charges under the FTC Act, DirecTV is also charged with violating the Restore Online Shoppers’ Confidence Act (ROSCA) for failing to clearly and conspicuously disclose on its website all of the material terms of offers with a negative option component.
DirecTV doesn’t share the same views as it relates to DirecTV’s advertising practices. “The FTC’s decision is flat-out wrong and we will vigorously defend ourselves, for as long as it takes,” said a DirecTV spokesman in an emailed 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.” This is not the first time the FTC has sued DirecTV. In both 2005 and 2009, the FTC agreed to settlements with DirecTV arising out of allegations of telemarketing violations, which amounted to $7.6 million in all.
This case raises an interesting issue between the fine print in contracts and the advertisements presented to customers up front. Here, DirecTV largely drew consumers to their company upon an initial promise of a 12-month subscription package for $19.99/month. However, the FTC and DirecTV disagree about what happened next. As to the FTC, DirecTV failed to adequately disclose to consumers that the one-year deal included a two-year contract with escalating costs and that consumers’ credit cards would be charged if they didn’t cancel the services before the end of the trial period. DirecTV says it explicitly explains to its customers the terms of its service multiple times before they agree to the deal. Which begs the questions: How much disclosure is enough? What responsibility do consumers have beyond the initial representations of a company? The FTC’s suit aims to require more than disclosure in the fine print of a contract that’s for sure. As a result, it seems that the FTC may be seeking to impose a new level of explicitness in such disclosures, but will the courts agree?