T-Mobile US, Inc. (“T-Mobile”) currently finds itself in hot water as New York Attorney General Eric Schneiderman’s office opens an investigation into the company’s “Un-Carrier” advertising campaign.   Amid consumer outcry over alleged misleading advertising and deceptive marketing practices, there have also been calls urging the Consumer Financial Protection Bureau to undertake an investigation of its own.

What is the nature of the consumer complaints that the NYAG is investigating?

Over the last several years, T-Mobile has sought to separate itself from other mobile carriers through its popular “Un-Carrier” campaign, touting the carrier’s willingness to allow consumers to join its network without having to enter into the annual service contracts that have become so prevalent in the mobile industry. Consumer complaints allege, however, that the “no-contract” marketing is misleading because of T-Mobile’s phone-loan program, which the company utilizes to allow customers to purchase new phones, and for which the vast majority of customers sign up. The complaints allege that these phone loans are the functional equivalent of the annual service contracts that T-Mobile claims to eschew in that they are 2-year loans that require payment in full of the outstanding balance if the consumer wishes to change carriers, much like early termination fees for cancelling the annual service contracts of other carriers. Consumers, having been sold on the premise that they can join T-Mobile without a long-term commitment and are free to switch carriers at any time, have complained that they are unaware of these lump-sum exit fees associated with T-Mobile’s phone loans.

Best Practices to Avoid Deceptive Marketing-Related Liability

As we have previously written, state attorneys general and federal authorities have been increasingly aggressive in investigating and prosecuting companies for deceptive advertising and marketing practices. Marketers continually face a wide range of legal risks. Therefore, before undertaking a campaign, it is imperative to engage knowledgeable counsel to ensure that your marketing practices and procedures are fully compliant with all applicable laws and regulations.