Officials at DirecTV are vowing to fight a lawsuit, filed Wednesday by the Federal Trade Commission (FTC), that accuses the direct satellite TV provider of misleading the public with deceptive advertising that tricks customers into signing up for discounted viewing packages that end up costing much more than anticipated.
Filed with the United States District Court for the Northern District of California, the FTC lawsuit comes as federal regulators continue to review AT&T’s plan, announced last May, to acquire DirecTV in a $49 billion transaction that would position the post-merger entity in second place among the nation’s multichannel video program distributors. Specifically, the FTC lawsuit alleges that DirecTV marketed a discounted, 12-month service package to customers without adequately disclosing that the deal locked subscribers into a two-year contract during which prices would nearly double—from $25 to $45 per month—at the end of the first year. According to the lawsuit, customers attempting to cancel service before the end of the contract term would be assessed early termination fees of up to $480. DirecTV is also charged with failing to disclose that offers of free premium channels required customers to actively cancel the channels at the end of a three-month trial period to avoid automatic charges. Claiming that DirecTV engaged in such advertising “in many instances” since 2007 and that a “substantial portion” of DirecTV’s 20 million U.S. subscribers were affected, the lawsuit seeks permanent injunctive relief against these practices as well as the establishment of a monetary fund from which millions of dollars in customer refunds would be paid by DirecTV.
In a press statement announcing the lawsuit, FTC Chairwoman Edith Ramirez proclaimed, “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.” Asserting, however, that “we go above and beyond to ensure that every new customer receives all the information they need,” a spokesman for DirecTV declared: “the FTC’s decision is flat-out wrong, and we will vigorously defend ourselves for as long as it takes.”