Yesterday, Federal Trade Commission (FTC) Chairwoman Edith Ramirez, Federal Communications Commission (FCC) Chairman Tom Wheeler, and two state attorneys general representing all 50 states and the District of Columbia held a press conference to announce a significant enforcement action against AT&T Mobility for unlawfully billing customers for unauthorized third-party charges, also known as “cramming.”
At the press conference, the officials announced a $105 million settlement with AT&T to resolve state and federal mobile cramming investigations. AT&T will pay $80 million to the FTC, which will administer refunds to consumers, $20 million in penalties to the 50 states and DC, and $5 million in penalties to the FCC. This is the largest cramming settlement and largest FCC enforcement action in history.
The FTC alleged that, since at least 2009, AT&T has placed unauthorized third-party charges on consumers’ bills — usually something like $9.99 a month for third party ringtone and text message subscriptions. According to the FTC, AT&T had strong reason to suspect these charges were unauthorized, but continued to place them on bills. AT&T retained about 35% of every charge, refused to provide appropriate refunds to complaining consumers, and even reassured the third-party companies that AT&T would try to lower the amount paid in refunds. Bills were structured to make it hard to tell whether there was a reoccurring charge from a third-party company.
As part of the settlement, AT&T must notify current customers who may have been wrongly billed and must bolster its refund practices. In addition, AT&T must obtain a consumer’s express, informed consent before placing any third-party charges on a bill, must clearly and conspicuously disclose third-party charges on bills, and allow consumers to block third-party charges.
Arent Fox will continue to monitor the law as it relates to mobile cramming and third-party billing practices. Please contact Michael B. Hazzard, Sarah L. Bruno, Adam D. Bowser, or Radhika Bhat with questions.