T-Mobile, FTC May Be Close to Settlement on Cramming Charges

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By Lydia Beyoud

Oct. 21 — T-Mobile USA Inc. and the Federal Trade Commission may be close to settling a complaint that alleges the wireless mobile provider made millions of dollars off of its customers by taking a cut of unauthorized cramming charges by third parties, according to court documents.

On Oct. 20, the deadline for T-Mobile to respond to the FTC's complaint, the parties filed a joint request for a 90-day stay of the deadline. The parties were “engaged in substantive settlement talks that they believe would resolve this matter and eliminate the need for further litigation,” according to the filing in the U.S. District Court for the Western District of Washington.

The FTC's July 1 complaint alleged deceptive and unfair practices under Section 5 of the FTC Act.

Cramming typically involves consumers being charged for third-party products, known as premium SMS services—including ringtones, wallpapers, horoscopes or celebrity gossip—that are sent to their mobile phones, sometimes without consent.

The practice has become a multibillion-dollar industry in recent years, with at least 20 million consumers being caught up in the practice every year, according to the FCC.

Between 2009 and 2013, T-Mobile received millions of dollars from third-party companies that charged its subscribers for text-message subscriptions that consumers never requested, the FTC said. The agency claimed the company also hid the charges on customers' bills and refused to offer full refunds to customers who challenged the unauthorized charges.

The FTC said in its complaint that it would seek repayment to all T-Mobile customers for such charges.

The Federal Communications Commission opened a concurrent investigation into the allegations against T-Mobile to determine if any fines or other penalties are necessary.

Legere's Protests 

T-Mobile Chief Executive Officer John Legere called the FTC complaint “unfounded and without merit,” in a July 3 news release.

“T-Mobile stopped billing for these premium SMS services last year and launched a proactive program to provide full refunds for any customer that feels that they were charged for something they did not want,” he said.

In November 2013, T-Mobile, AT&T Inc., Sprint Corp. and Verizon Communications Inc. said they planned to stop all billing for premium text services except charitable giving and political giving.

Legere said T-Mobile had also established a “proactive refund program” on June 10 for customers to receive reimbursement.

Joint FCC, FTC Action

It is expected that the FCC and FTC will coordinate any final action, similar to their case against AT&T. The agencies jointly announced Oct. 8 that AT&T agreed to a $105 million payment to settle a similar mobile cramming enforcement action.

The AT&T settlement is the largest enforcement action in the FCC's history.

To contact the reporter on this story: Lydia Beyoud in Washington at lbeyoud@bna.com

To contact the editor responsible for this story: Heather Rothman at hrothman@bna.com

Read the Oct. 20 stay request at http://www.bloomberglaw.com/public/document/Federal_Trade_Commission_v_TMobile_USA_Inc_Docket_No_214cv00967_W/1.

The July 1 complaint is here: http://www.bloomberglaw.com/public/document/Federal_Trade_Commission_v_TMobile_USA_Inc_Docket_No_214cv00967_W.