AT&T Mobile Cramming Action Start of FTC/FCC Joint Enforcement Era, Wheeler Says

Wheeler strongly indicated more FTC/FCC mobile cramming actions are in the pipeline. Mobile cramming hits 20 million people annually, he said, and AT&T is not the only guilty party. “Stay tuned about the other wireless providers,” he said. “It is not the last time that we will act jointly.”

The joint actions will likely expand to areas beyond mobile cramming, said FCC Enforcement Bureau Chief Travis LeBlanc in an interview. “That is a good possibility where our respective authorities allow us to proceed together,” he said. “For us it’s good government.” The AT&T joint action, for instance, gave the carrier an opportunity to negotiate a “global resolution” to all the potential cramming investigations, while saving government funds spent on multiple separate investigations, he said. LeBlanc led the AT&T investigation and negotiations.

The FTC and FCC alleged that since 2009, AT&T has allowed unauthorized charges, often for $9.99, to persist on millions of its customers’ monthly bills. The carrier willfully ignored ample warning signs, said FTC Chairwoman Edith Ramirez during the news conference. In some months, Ramirez said, consumers were requesting refunds for as much as 40 percent of third-party charges on their bills. “Instead of acting to stop the charges, AT&T continued to make hundreds of dollars from the practice by taking at least 35 percent of the charges and refused to provide refunds to many consumers,” she said. In 2011, AT&T “sought to reassure” third-party billers that it would “help lower refunds” by refunding only two months’ worth of unauthorized charges, Ramirez said. It was, Maryland Attorney General Doug Gansler said at the news conference, “insidious, fraudulent conduct.” Of the $105 million, $80 million will go toward consumer refunds, while $20 million will go state governments and $5 million will go to the U.S. Treasury as an FCC fine, the agencies said in a news release (http://1.usa.gov/1yNw5Pn).

An AT&T spokesman told us the company “had rigorous protections in place to guard consumers against unauthorized billing from these companies,” including a 60-day refund window for third-party charges, text notifications of third-party purchases and the ability to completely block third-party charges. AT&T also joined Sprint and T-Mobile late last year in an agreement with 45 state AGs to end third-party billing for premium short messaging services (PSMS)(CD Nov 25 p13). Ramirez stressed that mobile cramming problems go beyond PSMS. “The relief we're getting is for multiple things,” including unauthorized direct carrier billing, she said. The AT&T spokesman said the settlement “gives our customers who believe they were wrongfully billed for PSMS services the ability to get a refund."

Lawmakers piled on AT&T, lauding the commissions and AGs for their action. Sen. Richard Blumenthal, D-Conn., said the third-party charges AT&T allowed were “unscrupulous. ... Voluntary guidelines have failed to curb this pervasive nuisance, and even with this consent decree, strong federal regulations and ongoing oversight are needed.” The Senate Commerce Committee in July released a staff report saying unauthorized third-party wireless billing was costing consumers hundreds of millions of dollars per year, while raking in “tremendous” profits for mobile carriers (http://1.usa.gov/Zt9RSF). “Despite years of industry assurances that wireless cramming was a ‘de minimis’ problem, bogus charges on wireless bills have been widespread and have caused consumers substantial harm,” said Senate Commerce Committee Chair Jay Rockefeller, D-W.Va. Wednesday’s action “sends a clear message” to companies, said Sen. Amy Klobuchar, D-Minn., who has pushed the FCC and FTC to ramp up mobile cramming oversight.

"It’s not just the small, under-the-radar companies that have been raking in the money,” said Delara Derakhshani, the policy counsel for Consumers Union who has lobbied the Senate Commerce Committee on the ubiquity of mobile cramming. “The major wireless carriers like AT&T have profited greatly from this illegal practice."

The FCC and FTC recently moved against another major carrier, T-Mobile. The FTC sued the company after it refused to settle, and the FCC is looking into fining the company for its alleged behavior (CD July 2 p5). The FTC’s lawsuit surprised some consumer advocates, as the commission was taking a high-profile step into what has traditionally been FCC territory (CD July 7 p5). The FTC has been pushing the FCC since 2012 to adopt wireless cramming rules similar to its wireline cramming rules (CD July 24/12 p8). The FCC said its authority derives instead from its Truth-in-Billing rules and the prohibition of “unjust and unreasonable” actions in the Communications Act. That doesn’t mean wireless cramming rules are out of the question, LeBlanc told us. The FCC, he said, is “poised to act” on the rules it has been considering.

This was the seventh enforcement action on mobile cramming from the FTC and FCC since last year, said the two commissions. It’s unlikely it will be the last, LeBlanc told us. The FCC has “no reason to believe AT&T and T-Mobile were the only carriers engaged in cramming,” he said.