To end an unfair business practices investigation being conducted by 45 separate state attorneys general, Sirius XM Radio (“Sirius”) will pay a whopping $3.8 million into a settlement pool to be divided among the states. The attorneys general released various announcements of the deal, including that of the Attorney General of the State of New Jersey. Consumers in the settling states have until May 2015 to file a complaint, although the subject Sirius conduct must have occurred between July 28, 2008 and December 4, 2014.
Sirius XM Radio’s Unfair Business Practices
The states alleged that Sirius employed deceptive and unfair business practices to take advantage of consumers, in violation of various state consumer protection laws. The conduct Sirius is alleged to have engaged in includes automatic renewal of contracts without consent, unauthorized service fees, higher and unanticipated rates after low introductory rates, and failing to provide timely refunds. In addition, the states allege that Sirius made it “nearly impossible” for consumers to cancel their contracts with the satellite radio subscription company. In fact, according to the states, in many instances Sirius refused to honor their customers’ requests to cancel contracts and continued billing them for unwanted services.
Terms of Sirius’ Multi-State Settlement
Pursuant to the terms of the settlement agreement, Sirius entered into an Assurance of Voluntary Compliance. Moving forward, Sirius must clearly and conspicuously disclose all material terms and conditions of service at the point of sale, such as billing frequency, term length, automatic renewal dates and cancellation policies. With respect to automatic renewals, Sirius must now provide advance notice via regular mail or electronic mail about the upcoming automatic renewal if such renewed plan lasts longer than six months. Additionally, Sirius must revise its cancellation policy to make it easier for its customers to cancel plans. Moreover, Sirius can no longer provide incentive compensation for customer service representatives based solely on “saves,” or retaining current customers who attempt to cancel their service plans.
The importance of clear and conspicuous disclosure of terms and conditions of service is driven home by the terms of this settlement. Although Sirius claims that the settlement “has no material effect on the company,” smaller companies may not be so lucky. This blog has previously offered tips on what to do when you become the subject of a state attorney general investigation. However, the best thing to do is avoid attorney general scrutiny in the first place by consulting with competent counsel about your companies’ policies, marketing practices and disclosures.