July 14, 2014
The Federal Trade Commission filed a lawsuit in the U.S. District Court in Western Washington against the mobile communications service provider, T-Mobile. The FTC’s action alleges that T-Mobile engaged in the unfair trade practice of “cramming” unauthorized service charges into the bills of some of its customers. This case highlights a troubling practice in the communications marketplace which has a significant adverse effect on consumers.
Cramming is the practice of adding extra charges to a customer’s bill without the consent of the consumer. Often, these charges are associated with services which the customer has not specifically ordered. In many instances, the consumer may not even be aware that the charges have been assessed as they may be hidden within a long and complicated bill.
The FTC alleges that the unauthorized charges assessed by T-Mobile were associated with premium text services. The premium services in question were offered by third parties, not T-Mobile directly. Charges for those services were included in the T-Mobile bills, through a process referred to as, “third-party billing.”
The FTC claims that T-Mobile billed many of its customers for the third-party premium services even when those customers had not specifically ordered or authorized the services. The FTC’s complaint alleges that T-Mobile received approximately 35 or 40 percent of those third party charges as a result of the business arrangements it has with the third party service providers.
The FTC contends that T-Mobile derived substantial economic benefit from the fraudulent charges. It claims that T-Mobile received millions of dollars as result of its role in cramming the extra charges into its customer bills.
In addition to the legal action against T-Mobile, the FTC has also moved against the third party service providers. The FTC has reportedly filed lawsuits against the companies that provide the text messaging services at the heart of this controversy.
Some industry observers contend that the cramming process is facilitated by the fact that billing statements for mobile services are often very long and complicated. The FTC notes that T-Mobile bills to customers are, in some cases, more than 50 pages in length. These complex billing statements can make it more difficult for consumers to understand the charges and to identify the services involved.
Regulatory review of consumer practices in the mobile communications industry plays a critical role helping to ensure that mobile services are readily accessible to the public. As important telecommunications policy issues such as “net neutrality” are debated and addressed, it is also important that government authorities continue to exercise their enforcement powers to protect the interests of consumers in the often complex mobile services marketplace.